Strategic Management Analysis of Facebook Inc

This report analyzes the strategic management aspects of the company Facebook Inc to understand their place in the competitive business environment. With the help of the PESTEL, SWOT and Porter’s Five Forces Analysis, the different strengths, threats, opportunities and weaknesses have been identified that helped in understanding the aspects which can be incorporated for the growth of the business and improve the overall presence of the business in the market. Lastly, the cost leadership strategy has been considered to be the most effective tool that will make the business of Facebook more appropriate along with diversification that will be leading to success of company.

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Executive Summary
The report has aimed in the analysis of the strategic management aspects of the company
Facebook Inc to understand their place in the competitive business environment. With the
help of the PESTEL, SWOT and Porter’s Five Forces Analysis, the different strengths,
threats, opportunities and weaknesses have been identified that helped in understanding the
aspects which can be incorporated for the growth of the business and improve the overall
presence of the business in the market. Lastly, the cost leadership strategy has been
considered to be the most effective tool that will make the business of Facebook more
appropriate along with diversification that will be leading to success of company.

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Table of Contents
a) Introduction............................................................................................................................3
Overview of Case of Facebook Inc........................................................................................3
Mission and Vision................................................................................................................4
b) Internal and External Audit of Facebook Inc.........................................................................4
Porter’s Five Forces Model Analysis.....................................................................................4
SWOT Analysis.....................................................................................................................6
PESTLE Analysis...................................................................................................................8
c) Analysis of Current Business Strategies of Facebook Inc.....................................................9
d) Conclusion and Recommendations or Future Strategies.....................................................10
References................................................................................................................................12

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a) Introduction
The report aims in strategic management analysis of the Facebook Inc Company
through the internal and external audit of the company appropriately. With help of SWOT,
Porter’s Five Forces Analysis along with PESTEL Analysis, the different kinds of strengths,
opportunities along with weaknesses are identified that can affect the growth of the company
in the market in a positive or negative manner. Lastly, future recommendations are required
to be provided based on the respective case study that will be appropriate for growth of
company in contrast to the other companies which are competitors of Facebook.
Overview of Case of Facebook Inc
Facebook Inc is one of the American social media and social networking service
provider organizations which is based in Menlo Park, California. The company was
established in the year 2004 and it is headquartered at the United States of America. The
areas served by the organization is the entire worldwide and the CEO of the company is Mark
Zuckerberg. Facebook Inc is considered to be one of the Big Four Technology Firms like
Amazon, Apple as well as Google.
The revenue has increased to a great extent in the last few years and it is US$ 55.838
billion till the year 2018 and the number of employees employed in Facebook Inc is 30275
till the year 2018. The company had more than 2.3 billion monthly users who are active in
status till December 2018 and there are different kinds of media coverage which is
prominent. Facebook Inc offers the products and services wherein it acquired Instagram,
Oculus, WhatsApp and GrokStyle (Facebook.com 2019).

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Mission and Vision
The main vision of Facebook is to provide the different individuals with the options to
stay connected with the friends and family as to discover what is going in the world along
with sharing and expressing the different matters appropriately. The corporate vision of the
company is not just simply the social networking website; however, it is the platform in
which the different individuals can share the valuable communication along with acquisition
of knowledge that will be appropriate for the different customers (Facebook.com 2019).
The mission of Facebook Inc is to provide the different individuals the power to share
along with make the world connected and open. The new corporate vision of the company
helps in showcasing that the social media is one of the most essential aspects which will be
helpful in development of community along with enabling and empowering the people.
b) Internal and External Audit of Facebook Inc
Both the internal and external analysis plays a major role in understanding the
different kinds of strengths, opportunities, threats and weaknesses are identified that will be
creating effect on growth of the company in positive or negative manner.
Porter’s Five Forces Model Analysis
Bargaining Power of Buyers- The different advertisers as well as users are the
different potential customers of Facebook Inc. The different customers of Facebook demand
for the profile privacy wherein the customers impose huge amount of pressure on Facebook
Inc in terms of their wants from the company. As there is intense competition, the different
buyers are available with choices and there is no cost of switching involved in the same as
well (Aguinis, Edwards and Bradley 2017). The other buyers of Facebook Inc include the

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marketers which runs advertisements on it and they can shift their focus on other social media
websites when Facebook will be raising the prices of advertisements beyond reasoning.
Bargaining Power of Suppliers- It is moderate in nature wherein the different
suppliers of the company are the different companies which supply it with the technology
along with developers that will be appropriate for development of the different applications
and software for Facebook. In such scenario, the choice of the suppliers is limited and the
switching cost is very costly in nature (Bauer and Matzler 2014).
Competitive Rivalry- During the starting years of Facebook, there was no such stiff
competition any kind of competition. However, in the present scenario, there is no
competitors of Facebook which includes Twitter and Snapchat and social media is place in
which the continuous type of innovation along with usage of latest technologies play a vital
role for the survival. In such scenario, the competitive rivalry is medium as the trends of
customers are changing in a quick manner and Google+ and Twitter tries to offer some of the
unique features which is not available in Facebook (Bohari, Hin and Fuad 2017).
Threat of New Entrants- It is low in nature as the set up of the different kinds of
social media related websites like Facebook along with different apps which are associated is
expensive risk and there is huge amount of resources are necessary for marketing. Moreover,
the new entrants who will be joining the social media aspects will require extra and loyal
customer base which is difficult (Bromiley et al. 2015).
Threat of Substitutes- It is high in nature as there are different substitutes includes
Google+ and Twitter which are continuously being introduced in market and it is the threat
for Facebook Inc. The business model is easily copied by others and it affects the overall
innovative approach of company (Banker, Mashruwala and Tripathy 2014).

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SWOT Analysis
With the help of SWOT analysis, it indicates the different strengths along with
supporting the leadership of company in the business of online social media. On contrary, the
company needs to continue innovating which will be ensuring that the different threats which
is affecting the overall effectiveness of the company.
Strengths
Facebook has large acquired mind space of the customers that shows the strong
popularity across the globe and the strong base of customers helps in expanding the business
appropriately. It helps to provide the different individuals with the strong platform to connect
with the different friends and family members which is the major strength of the company
(David and David 2013).
There are different other subsidiaries of Facebook which includes WhatsApp along
with Instagram that are the brands which are popular in nature. The respective website is used
by different millions of individuals that have created tremendous social and political impact
along with has the revolutionized internet that will be effective in managing operations
(Florin 2014).
Weaknesses
The social networking website along with mobile applications are easily imitable in
case of the basic features that is the major weakness as it makes the organization vulnerable
to competition. Furthermore, there are various controversies regarding the leak of data, free
basics along with fake names that is creating and there are different other instances violating
the age restrictions is something that is hurting the brand image of Facebook (Florin 2014).

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There is lack of the customization of the website which is the weak protection of the
information of the users. The low diversification of the business is the other aspect wherein
the online advertising mechanism is the weakness as the different users could distinguish the
different advertisements such as nuisance in the social media experience. In addition, the
corporation suffers from low rate of diversification that maximises the risk exposure in the
market (Galliers and Leidner 2014).
Opportunities
The major opportunity which can be helpful for Facebook to diversify their business
outside the core social media along with the other online advertising related business in the
international market. The company Facebook Inc can take in the opportunity to adopt the
different offerings which are new to entice the other target audiences in the market (Heding,
Knudtzen and Bjerre 2015). There can be inclusion of the different other features for the
businesses and older businesses and they need to look in the different other areas which will
be adding value to the business.
Furthermore, the penetration of the market along with development of the company
can help in increasing revenues and membership will help Facebook in reforming some of the
strategies along with management direction to ensure the continuous growth appropriately
(Hitt and Duane Ireland 2017). The other opportunity which will be beneficial for the success
of company is to innovate products which will be complementary to social networking
website along with mobile applications.
Threats
Imitation is the main threat which will be affecting the business of Facebook Inc as
there are different other firms which can develop such social networking websites along with

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mobile related applications which is similar to Facebook as it has the potential to reduce the
share in the market of Facebook and the business performance will be reduced subsequently
(Holsapple 2013).
The other threat which can be faced by Facebook is cybercrime as there can be
different instances related to breach of data along with governmental parties taking deeper
look in the privacy of internet along with regulatory pressure on the businesses related to
internet businesses which are high (Indiatsy et al. 2014). Moreover, due to the different
controversies which have taken place previously for Facebook, the company is always under
scrutiny and it affects the brand image in comparison to the other competitors as well.
PESTLE Analysis
Political Factors- The political stability in the different developed countries are stable
which will be appropriate for the progress of the company. In addition, the popular
governmental support for globalization is the other opportunity which will be expanding the
services accurately (Khodakarami and Chan 2014). However, there can be political barriers
faced by Facebook in Chinese market that can affect growth of the company negatively.
Economic Factors- The increase in the stability of the developing countries is the
major opportunity of Facebook as it will be leading to the improvement of the infrastructure
of the telecom companies and such external factors will be supporting the overall expansion
of the access to the social network of Facebook (Lasserre 2017). In addition, the disposable
income of the different individuals in developing nations helps in improving capacity of the
different users to purchase the various devices and it will be contributing to the expansion of
the business.

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Social Factors- In the respective scenario, there will be increasing preference for the
different high-quality services that will be working as the opportunity for Facebook. The
other opportunity is to increase the online buying worldwide which will be creating
additional services to profit from the retail sales which will be generated through such social
networking sites (Schaltegger, Burritt and Petersen 2017).
Technological Factors- The increase in the usage of the mobile phones is one of the
main aspects which has been considered as the opportunity for Facebook as they can help in
improving the experience of the users. However, the major threat is the increasing
competition in the market as there are different social media networks which are attempting
to attract the different users from the social media services of the company (Tanwar 2013).
The trend related to technological advancements will be leading to saturation in the market
that will be affecting the overall the overall effectiveness of the Facebook in a negative
manner.
Environmental Factors- The increased emphasis on the sustainability of the business
is the opportunity which will be enhancing the social media business related sustainability to
satisfy the different concerns relating to natural environment. However, there can be issues
related to change in climate that can prompt the overall business to transfer servers along
with equipment to other location in future (Volberda et al. 2013).
Legal Factors- The improvement in the patent laws in the entire world is the
opportunity for Facebook for improvement in patent laws around world. However, Facebook
suffers their ban in market of China, however the firm has opportunity to adjust to different
services along with negotiate with government of China to gain proper access to social
networking aspects of Chinese market (Welford 2014).

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c) Analysis of Current Business Strategies of Facebook Inc
Firstly, the cost leadership strategy has been adopted by Facebook for gaining
competitive advantage. The respective generic strategy helps in includes the minimization of
the costs related to performing business and the minimization of cost helps in reducing the
prices in a competitive manner. For instance- Facebook Inc utilizes the computing
technologies which will be helpful in maximizing efficiency of the social networking website
and online nature of Facebook helps them in reaching to the internet users in the global
market (Welford 2014).
Facebook Inc did not gain the advantage of the first mover in the online social media
networking segment, as the launching was done after MySpace and Friendster. However, the
uncompromised kind of approach of Facebook towards the customers has been helpful for
Facebook in achieving competitiveness through crating proper balance between
customization as well as standardization of the website and it resulted in making Facebook
most popular social networking website in few years.
In addition, the business strategy applied by Facebook Inc is through acquisitions as
the main focus is on establishing proper presence in the different branches of the e-commerce
through acquiring relevant kind of business. After taking over WhatsApp for mobile devices,
in the year 2015, Facebook has been able to earn a revenue of USD17.93 billion which
showed increase of 44% along with ad revenue which was of USD17.08 billion which
created increase of 49% in comparison to the last year (Welford 2014).
Additionally, Facebook Inc has been able to achieve growth through market
penetration intensive strategy as the main objective is to maximise the current share in the
market. For instance- Through increasing and creating alliances with telecom companies, the
respective strategy helps company in maximizing their reach using the existing assets. The

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Diversification is the other intensive strategy used by Facebook in maximizing their share in
market wherein Facebook acquired Oculus VR in order to offer the virtual technological
reality which helps in complementing the social networking services (Welford 2014).
d) Conclusion and Recommendations or Future Strategies
Therefore, from the above, it can be concluded that there are different threats and
risks faced by the business in contrast to the other competitor companies in the market.
However, with the implementation of diversification and development of product related
strategies can play a vital role in improving the business operations successfully and gain
competitive advantage in the market as well. In the future. Facebook Inc will be becoming a
portal for the individuals to socialize along with connect with different people in various parts
of the world for businesses as well as humanity and become more competitive in nature.
From the strategic management analysis of Facebook Inc, there are few
recommendations which can be provided to Facebook in order to remain competitive in the
market and improve the business operations successfully in contrast to the other competitors
present in the market in the following manner:
Firstly, Facebook Inc needs to continue the research and development investments as
it will be helpful in increasing the capabilities in counteracting the cybercrime issues and the
business of Facebook requires to continue making different efforts for negotiating with the
governments which will be opening up the market wherein they have minimal or no such
presence in the market (Zott and Amit 2013).
Furthermore, the privacy is the other aspect which should be incorporated by
Facebook in making the individuals understand how to use the website in a proper manner,
however there are few aspects which becomes public and this becomes the breach in privacy.

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In such scenario, Facebook needs to tighten the privacy control aspects in the organization to
improve such services and it will be helpful in improving the overall efficiency effectively
and it will be working as the ultimate tool to be more competitive (Zott and Amit 2013).

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