Strategic Management in Social Networking and Micro Blogging Industry

This report discusses the importance of strategic management in the social networking and micro blogging industry, with a focus on Twitter. It analyzes the competitive environment of Twitter using Porter's Five Forces model and evaluates its strategic capability using VRIO analysis. The report also explores the emergent and deliberate approach to strategy formulation adopted by Twitter.

Strategic Management
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Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Analyse what makes the Twitter's approach to strategy formulation both emergent as well as
deliberate.....................................................................................................................................3
Explain the importance of development of strategic management in social networking and
micro blogging industry..............................................................................................................5
Critically analyse the competitive environment of Twitter in the social networking industry...5
Evaluation of strategic capability of Twitter using VRIO analysis............................................7
Critical analysis of current strategies of Twitter and alternative future strategies....................10
Use SAF model, select the strategy that Twitter should adopt in the future.............................11
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14
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INTRODUCTION
Strategic management is an important aspect within an organisation and helps managers
to make effective decisions and directing various organisational activities in an effective way.
The primary purpose of strategic management is to assist it in achieving its goals and objectives.
The process of strategic management involves formulation as well as implementation of major
goals that are set by the management of a company (Ahammad, Glaister and Gomes, 2020).
Constant changes in the business environment makes it important for an organisation to keep
revising its strategies. This report is based on the organisation Twitter, which is a social
networking and micro blogging company. The users can interact with each other through
messages which are known as “tweets”. The company was founded in the year 2006 and is
headquartered in United States. The report explains the reason that makes strategy formulation
approach of Twitter emergent and deliberate. It also explains the importance of developing
strategic management for organisations that operate in the social networking as well as micro
blogging industry. The report also includes a critical evaluation of the current strategies of
Twitter. Apart from this, a critical evaluation of the competitive environment of the company,
using relevant model is also included in the report.
MAIN BODY
Analyse what makes the Twitter's approach to strategy formulation both emergent as well as
deliberate
Twitter has a completely different approach when it comes to formulating strategy
because it has to deal with a large number of users. Therefore, it is important for the company to
formulate a strategy so that it can conduct business operations in an effective manner. While
developing a strategy, it is important that the company takes into account the different strategies
and then opt for the best one (Argyres, Mahoney and Nickerson, 2019). One of the approaches
that are unique to Twitter are the short messages that are referred to as “Tweets”. Through this,
users can post updates and interact with each other across the world. The company's approach to
strategy formulation is both emergent as well as deliberate because it helps in making sure the
business operations are conducted in an efficient manner. The process involves extensive
planning and setting goals that are measurable and achievable. There are different principles of
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both deliberate as well as emergent approaches that can help Twitter in making sure that its
overall performance and productivity is enhanced.
It can be said that extensive research as well as careful planning are the components that
contribute to the overall strategy formulation of the respective company both emergent as well as
deliberate. The company carries out extensive research of the latest trends in market as well as
competitors. This helps in making sure that effective strategy is formulated and the performance
of the company is enhanced. Twitter tries to incorporate effective innovative features to its
platform so that the overall experience of the users is enhanced (Boone and et. al., 2019). The
company also makes sure that the services offered by it are exclusive and enhanced. This is what
makes the overall process of strategy formulation of the company emergent and deliberate at the
same time. The emergent approach to strategy formulation states that it is a constant process that
involves learning as well as testing of the business.
Differences and Limitations of the Approaches
In the emergent approach, the company implements changes on the strategy and when it
being executed. One of the limitations of this approach is that it cannot be predicted and can
sometimes pose to be difficult for the company to develop a plan using this approach so as to
improve overall business operations. On the other hand, a deliberate strategy is rigid when it
comes to influencing the business operations. Thus, it can be said that while emergent approach
to strategy formulation is consistent, deliberate approach is formal and outlines the vision
towards strategy formulation. The benefits of deliberate strategy include effective allocation of
resources, organisation alignment and innovation (Carter and Stickney, 2019). On the other hand,
emergent strategy also has certain advantages like flexibility, learning as well as building
support. This can lead to an increase in the overall morale of the employees and performance.
Principles of Deliberate and Emergent Approaches
Twitter's approach to strategy formulation is both deliberate as well as emergent, which
has helped the company in retaining its existing performance as well as boosting morale of its
employees. Not only this, the company has also been able to retain a competitive advantage
against competitors like Facebook, Flickr and Snap chat. The principles of deliberate approach
are Intention vs Attention and Role vs Title. Whereas the principles of emergent approach are
considered to be hypothesis depending on which the market is created. The company has adopted
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various measures in the last few years which have proved to be effective for conducting its
overall business operations in an effective manner.
Explain the importance of development of strategic management in social networking and micro
blogging industry
Strategic management is extremely important for companies that operate in social
networking and micro blogging industry. This is because the industry is growing at an
exceptionally high rate and can significantly affect the overall business strategy of a company.
Twitter is among the largest social networking sites and it is extremely important for the
company to have a strong business strategy in order to conduct business operations in an
effective manner (Certo and et. al., 2020). One of the reasons to develop strategic management
within the company is that it provides a direction to the employees working in the company
because this way, they will be able to perform various tasks in an efficient way.
Not only this, a business strategy helps in increasing the overall effectiveness of a
business which further helps in achieving goals and objectives. Strategic management within
social networking and micro blogging industry helps an organisation in building a strong
presence online. It also ensure effective decision-making by the management of the company and
helps in reducing any kind of risks. Lastly, strategic management also outlines the different
actions that can allow an organisation to attain its goals and objectives efficiently.
Critically analyse the competitive environment of Twitter in the social networking industry
Twitter is a micro blogging and social networking website wherein users can post updates
and interact with each other through small messages known as tweets (Crawshaw, Budhwar and
Davis, 2020). Besides Twitter, there are various companies that operate in the social networking
and micro blogging industry like Facebook, Instagram etc. This makes the competitive
environment of Twitter highly competitive and dynamic.
Porter's Five Forces Model
Porter's Five Forces is a strategic model that can be used in order to analyse the
competition of an organisation. The model is useful because it helps an organisation in
identifying the factors that can affect its overall performance and make informed decisions. The
model is described below in context to Twitter.
Threat of New Entrants – This is a weak force because new entrants within the social
networking and micro blogging industry will have to come up with some kind of innovation as
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well as offer the customers new ways of doing things. And the technology required for
developing a new innovative website or even an application can take up a lot of time as well as
money. Twitter is an existing brand that has been able to develop a strong brand image as well as
brand loyalty over the years. Also, the company keeps on innovating its services by adding new
features to the website.
Bargaining Power of Suppliers – This is a strong force because the number of suppliers
within the respective industry is limited. This gives a high power to bargain to the suppliers.
Therefore, suppliers who have a high bargaining power can use it to negotiate and earn high
prices from the company (Drobyazko and et. al., 2019). This force can affect the overall
profitability as well as performance of the company in the market.
Bargaining Power of Buyers – As per the viewpoint of Ewan Murphy, this is a strong
force because the buyers of the respective company are the marketers of different organisations
as well as various businesses that post ads on the Twitter (Twitter Porter Five Forces Analysis,
2020). They do this by paying a certain amount to the company and because there are a lot of
social media platforms that allow users to perform various tasks and increase their overall share
in the market.
Threat of Substitute Products – There are a large number of substitutes in the social
networking and micro blogging industry which make this force a strong force. The different
substitute companies are Facebook, Instagram etc. All of these organisations compete with each
other in order to gain a large number of users. Twitter offers a limited number of characters in a
tweet. The substitute companies can take advantage of this because none of them have this
feature.
Rivalry Among Existing Competitors – This is a strong force because Twitter operates
in a highly dynamic and competitive environment. The major competitors of the respective
company are Facebook and Instagram (Grab, Olaru and Gavril, 2019). The social networking
industry is going through various technical advancements which is also one of the reasons for the
rivalry. Therefore, if this continues, the overall performance as well as productivity of the
respective company will be affected.
SWOT Analysis
Strengths – The company has a strong brand image and a large base of users that are
loyal to it. Also, Twitter was one of the early entrants in the social networking industry when
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there were not many competitors. The company makes sure that the best technology is used in
the platform so that the users get a seamless experience.
Weaknesses – One of the major weaknesses of the company is that there is an unequal
distribution of tweets among users. Apart from this, there are no new innovative features on the
platform. The customers recently also faced issues regarding security of their data online.
Opportunities – The company has an opportunity of integrating its platform with other
platforms in order to increase overall traffic (SWOT analysis of Twitter, 2020). Twitter can also
work on implementing innovation in its platform and improve the overall user experience. This
will lead to an increase in the overall number of active users.
Threats – Fake accounts as well as hacking incidents can pose threat to the company.
Apart from this, competition can also as a major threat and impact the overall performance as
well as productivity of the company (Kerzner, 2019). This is because competitors like Facebook
constantly upgrade their features which can make the existence of the company vulnerable in the
industry.
Therefore, from the above analysis of the competitive environment of Twitter, it can be
said that there can be various issues that can arise from the competitive environment like
competition, threat of new entrants etc. Therefore, it is important for the company to take them
into account while developing future strategies. This will help it in gaining a competitive
advantage as well as maintaining its performance against competitors like Facebook and
Instagram.
Evaluation of strategic capability of Twitter using VRIO analysis
VRIO Analysis
It can be referred to a technique that is basically used in order to evaluate the resources of
a company and how can it gain competitive advantage (Li and et. al., 2019). VRIO is an
important tool because it enables organisations to make effective ad informed decisions. The
VRIO analysis of Twitter is described below -
Resources Valuable Rare Inimitable Organised
Products Yes - - -
Financial Resources Yes Yes - -
Patents Yes Yes Yes -
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Employees Yes Yes Yes Yes
Valuable
 These are those resources that help an organisation in increasing the overall perceived
value of customers (VRIO Framework, 2020). This is usually done either by decreasing
the prices of the products or by increasing overall differentiation. It is important for an
organisation to keep reviewing its resources as changing business environment can make
them less valuable.
 Products are a valuable resource for Twitter because they attract users and help the firm
in generating profits (O'brien, 2019). Financial resources are valuable because they allow
the respective company to conduct various business operations effectively.
 Patents are another valuable resource because they ensure that the competitors do not
copy the products or services and also help in creating a goodwill for the firm.
 Employees are considered to be a valuable resource because they help Twitter in
performing effectively and make sure that goals and objectives are achieved.
Rare
 These are the resources that can only be acquired by a few organisations and provide a
temporary competitive advantage to the company. Products are not considered to be a
rare resource because there are other companies in the social networking and micro
blogging industry like Facebook and Instagram that offer similar services to the users.
 Financial resources are a rare resource because they have helped Twitter in conducting
various business related activities in an effective manner and gain the position it is at
today (Okumus and et. al., 2019).
 Patents are also considered to be a rare resource because the company has patents that are
particular to its services and technology.
 Lastly, employees are another rare resource because the people who work for Twitter are
skilled and possess relevant experience. Thus, they cannot be found with other
competitors.
Inimitable
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 Resources that are costly to imitate and competitors cannot easily imitate or substitute
them are referred to as inimitable resources. An organisation can imitate the products and
services of Twitter in two ways, by directly manufacturing duplicate products or
providing products and services at a comparable price.
 Products ate not an inimitable resource because more or less, various social networking
companies offer similar products. Financial resources are also not inimitable because a
competitor can duplicate it anytime.
 Patents are an inimitable resource because no competitor of the respective company
Twitter can copy the same (Pearlson, Saunders and Galletta, 2019). This is also because
patents are of the nature that they can't be imitated.
 Lastly, employees are an inimitable resource because the skills as well as experience that
is possessed by the employees working in Twitter might be absent in the workforce of
other companies.
Organized
 Resources that are not organized effectively and capture the required value do not yield
any kind of advantage for the company. Therefore, it is important for a firm to organize
its processes, resources, policies etc. to utilize it various rare, valuable and inimitable
resources to their full potential.
 Products, Financial Resources as well as Patents are not a part of organised resources
because they are required to be organized regularly. But, employees of the firm should be
organized so that their skills and experience can be utilized to the full extent. This is
important because only then, the respective organisation, Twitter will be able to gain a
competitive advantage in the market.
Therefore, there are many lessons that other organisations can learn from the above
analysis as well as evaluation of the resources of Twitter (Petera and Šoljaková, 2020).
Companies like Instagram, Flickr, Facebook etc. should learn that the various resources available
within the company should be utilized in an effective way. Also, they can be grouped in four
categories, valuable, rare, inimitable and organized. The companies can use VRIO analysis for
strategic planning so that effective decisions can be made.
From the models that are used above, i.e., Porter's five Forces Model as well as SWOT
analysis, it can be stated that they are important for a firm and can be used in order to understand
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the competitive environment of the company. Not only this, the intensity of the different five
forces can also be analysed. Apart from this, SWOT analysis can be used to identify strengths,
weaknesses, opportunities as well as potential threats that can impact the overall performance as
well as productivity of the firm. This will help in developing effective strategies and thus gaining
a competitive advantage against competitors.
Critical analysis of current strategies of Twitter and alternative future strategies
The current strategy of the company is to create and publish content for the users through
social media. The company has a strategy of build mechanisms as well as user interfaces that
enable the users to interact with each other in an effective manner. A critical analysis of the
company's current strategies is explained below -
Porter's Generic Strategies
Cost Leadership – In this strategy, a company targets a large market and then offers the
lowest price possible to the customers (Pröllochs and Feuerriegel, 2020). There are two options
that are available with a company in this strategy. It can either keep the costs of products as low
as possible or ensure that the market share is large.
Differentiation – As per the viewpoint of Anneke Kuijk, in this strategy, the company
targets a broad market but offers products and services with unique features (Porter’s Generic
Strategies, 2020). It aims to make its products innovate and unique in order to attract as many
customers as possible.
Focus – There are two types of focus strategies, cost focus as well as differentiation focus
strategies. In this strategy, the company targets a niche market and offers the lowest price. While
in a differentiation focus strategy, the company offers products that are unique and innovative
features.
Bowman’s Strategic clock model:
This model explores different strategic positioning option for an organisation by which
firm can attain desired competitive advantages (Ravenda and et. al., 2019). The strategic clock
of Bowman define that a business will have numerous options that can assist to position a
product on the basis of its perceived value and price. In context of Twitter this model can
determine several option that can aid them to create a desired position in the market as:
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Low Price and Low Value Added (Position 1): At this stage, value and price of
products are perceived as very low. Thus, firm can remain competitive in the market only by
implementing cost cutting approach that no-one else can undercut easily.
Low Price (Position 2): At this position, firm find themselves as low-cost leader by
making a low profit margin on each product. In this process, organisation can generate high
profits with the help of high volume of outputs.
Hybrid (Position 3): In order to build desired position in the market, an organisation can
hybrid themselves with the help of low price as well as differentiation approach at the same time.
Differentiation (Position 4): The objective of implementing this strategy is to offer high
level of perceived value services by applying unique ideas and creative thoughts (Richard and et.
al., 2019). At this stage, firm requires to offer their products at relatively price.
Focused Differentiation (Position 5): This strategy basically implemented by luxury
brands by offering their services at highest price level. Customers usually buy such products due
to the high perceived value.
Risky High Margins (Position 6): At this stage, organisation sets high prices of their
products without implementing any additional value. These kind of strategy can be risky that
may attempt uncompetitive advantages because these practices are only for consistent customers
who can buy these high prices.
Monopoly Pricing (Position 7): This is a highest profit margin stage in which there is
only one business that offering desired services to their customers.
Loss of Market Share (Position 8): At this stage, organisation offering middle or
standard range of their products with low perceived value. This is unlikely to win position on
which customers have better options.
Therefore, in the future, the company can adopt the differentiation strategy in order to
gain a competitive advantage (Schilling and Shankar, 2019). This will involve the company
introducing innovations in its social media services. A differentiation strategy is also important
because many of Twitter's competitors already offer services that are highly innovative and
unique.
Use SAF model, select the strategy that Twitter should adopt in the future
Suitability, Acceptability and Feasibility model is a strategic model wherein suitability is
concerned with if an alternative addresses the major issues that are related to the overall strategic
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position of the organisation. In simple words, it can be said that suitability is one of the most
important factors in the model and can be assessed through different criteria that are particularly
important for the business. The different criteria can include expectation suitability, capability
suitability as well as environmental suitability. If an organisation decides to enter a new market,
it can use the SAF strategic model to determine if the strategic decisions can be sustained or not.
Therefore, in order to assess the suitability of a particular strategy, Twitter should analyse if the
strategy utilizes the strengths of the company in an effective manner. It also identifies how a
strategy overcomes difficulties.
Acceptability on the other hand, is the second aspect of the model that is concerned about
measuring the return, risks as well as reactions of the stakeholders that result from a specific
strategy. Returns are measured on the basis of the benefits that stakeholders of the company
expect from that strategy. The returns can either be financial or non financial and they depend on
what the stakeholders decide (Stoyanova and et. al., 2019). Calculations pertaining to returns can
be performed through various methods. The different methods can include profitability analysis,
cost-benefit analysis, shareholder value analysis etc. It is also important to measure the risk
which involves the probability of failure of a particular risk as well as any kind of corporate
impacts. The acceptability aspect also measures the return like forecasting return on investment
or ROI. Therefore, it is important for the shareholders of the company to support it at all times.
Feasibility is the third aspect of the respective strategic model that is basically concerned
with either choosing or not choosing a particular strategy. Even if a business lacks resources, the
ability to implement the strategy is what contributes to the overall success of the company. Thus,
it is important to measure the overall financial feasibility. This can be done by analysing the cash
flows in the company, through break-even analysis and various other tests. There are certain
questions that need to be answered before adopting this strategy (Teece, 2019). It includes the
amount of material, equipment as well as man power does the company have and if there is
organisational structure that are required in order to make sure that a strategy is performs well. It
is also analysed if the option that is available is in sync with the opportunities available to the
company. If the management of the firm thinks that the option is not feasible enough, it is not
opted.
Therefore, Twitter should adopt the differentiation strategy in future if it wants to gain a
competitive advantage against competitors. In order to do so, the company will have to
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differentiate its products from others and this can be done by innovating the services that are
offered by it. This will not only help it stand out in the market but also contribute to its overall
profitability as well. Since various competitors of the firm like Facebook, Flickr and Instagram
do not have very differentiated products, implementing this strategy will help Twitter in lowering
the force of rivalry among existing competitors (Ahammad, Glaister and Gomes, 2020). Apart
from this, the company will also be able to overcome the threat of substitute products in the
market. Thus, differentiation strategy will be beneficial for the respective company, Twitter and
will significantly contribute to the overall profitability and performance in the market against
existing players.
CONCLUSION
From the above report, it can be concluded that the process of strategic management can
help an organisation in gaining a competitive advantage in the market. The reason behind this is
that it helps the management of the company to formulate effective strategies which will further
contribute to an overall informed decision making process. Firms that operate in the social
networking industry conduct their business activities in a highly dynamic and competitive
environment. This makes it important to use various strategic tools and techniques like Porter's
Five Forces model, Porter's Generic Strategies, SWOT analysis etc. These tools and techniques
not only help in analysing the competition in the business environment but also ensure that
resources available with the company are utilized in the most effective manner. Bowman's
Strategy Clock is another model that can be used to identify various options in which a product
of a company can be placed based on its perceived value as well as price. This ensures that goals
and objectives are achieved effectively.
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