Comprehensive Analysis of Facebook's Business Environment and Strategy

This report provides a comprehensive analysis of Facebook's business environment. It begins with an introduction to environmental analysis and its strategic importance, followed by an in-depth examination of Facebook's external environment using the PESTLE framework. The report assesses the political, economic, social, technological, legal, and environmental factors impacting the company. Furthermore, it analyzes Facebook's microenvironment and competitive landscape through Porter's Five Forces, evaluating the bargaining power of suppliers and buyers, the threat of new entrants and substitutes, and competitive rivalry. The internal environment is also examined, focusing on resources, capabilities, core skills, and core competencies, alongside a SWOT analysis. The report concludes with a summary of key findings and implications for Facebook's strategic decision-making within the dynamic social media industry.

Analysis of Business
Environment

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
1. Impact of external environment on Facebook ........................................................................1
2. Analysis the impact of micro environment as well as competition of Facebook. ..................3
3. Analysis on internal environment of Facebook Inc. by taking resources, capabilities, core
skills and core competencies. .....................................................................................................6
4. Analysis of micro and macro internal environment of Facebook...........................................8
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Environment analysis is a strategically oriented instrument. Companies use these tools in
order to identify all internal and external factors that have great impact on the performance of
company. Environment is greatly affected by their environment. Facebook Inc. has been chosen
in this report. The founder of Facebook Company is Mark Zuckerberg which was launched on 4
February 2004. IT is the biggest company operating in social media which has operating income
about US$20.203 billion in 2017 (Allison and et.al., 2015).
The entire study is about the challenges faced by company operated or functioning within
macro and micro environment. The assessment will make understand the impact of external
environment using Pestle analysis tool. Further, the report will also identify the key stakeholders
within the global social media industry with the help of Porters' five forces analysis. SWOT
analysis will also be done in this assignment. The aim of this assignment is to conduct an
analysis of Facebook functioning on wide range of social media industry in order to assist in
decision making in respect to current position.
MAIN BODY
1. Impact of external environment on Facebook
PESTLE Analysis
It is an analytical instrument for statical planning of business. It helps in understanding
the impact of external environment on functions and operations of any company. External
environment includes changes in law, introduction of new laws, trade barriers and demographic
changes. Pestle includes six factors that are political, economical, social, technological, legal and
environmental factors (Abrahamsson and et.al, 2017).
Political factors- Political factors have direct and great impact on the operations and
functions of various businesses; there is a great impact even on Facebook. It includes taxes,
legislations and regulations as well as fiscal, trade and tariff policies which are imposed by
government. Facebook is facing dynamic challenges as it provided internet services all over the
world. Political factors of Facebook involves stability in political factors, freedom of press, state
of human rights and many other elements that influence revenues or income of company in direct
or indirect ways. Facebook site is operating on a wide platforms where voice of disagreement
with the policies of government and vitiated practises all over the world. Issues regarding right of
1

humans has caused the limitation of social networking site in developing nations (Ingram and
et.al., 2015).
Economic factors- Economic factors also have a great impact on the operations and
functions on many businesses. It includes rate of inflation, employment, saving, interest, foreign
exchange as well as economic cycle that denotes an aggregate investment as well as aggregate
demand in an economy. Norms regarding competitions and their impact is also included in
economic factors that have immense impact on the company that can utilize economic elements
of nations like growth rate, inflation rate. These are all factors that affect Facebook are as
follows- types of economic system in nations and how it can be stable, interventions of
government in free market, rates of exchanges, efficiency in the market of finance and many
others (Scuotto and et.al., 2017).
Social factors- Social factors mainly include the way of people living in country and
have a direct impact on the culture of company. In order to understand customers of Facebook,
belief and attitudes of the populations plays a vital role. Social factors is a leadership of
Facebook company as it includes demographic, skills and perceptions level of the people,
structure of class, hierarchy and structure of power in the community, level of education,
attitudes and leisure interest. However, Facebook is boosting social apps that use Facebook login
which is a need to be listed on the App centre. They also sell free apps about 30%.
Technological factors- Technological factors have great impact on each and every
business as in today's era people are more advanced who always demand better and advance
technology. In social media industry, there is not only technological advancement but it also
includes speed up the advancement of technology (Hamilton and Webster, 2015). Facebook Inc.
is running its business with fast technology satisfying it users. Analysis of technology includes
development of recent technology by the challengers of Facebook, impact of technology on
offering of products, impact of cost and rate of technological diffusion. Company must use the
latest technologies to provide more comforts to users.
Legal factors- Laws and legislations are main factors included in legal factors that has
direct impact on the operations of business. Laws, rules and regulations play a significant role
especially operating in social media industries. In order to smooth functioning of Facebook, it is
very essential to follow norms and regulations imposed by the government. To make secure and
safe handling of information, it is crucial to have legal rights and norms. Patents, copyrights,
2

trademark are various legal protection tools that give opportunities to Facebook to protect their
new innovations and creations (Deasy and et.al., 2015). There are some other legal factors that
Facebook can consider while entering in new markets such as laws of anti-thrust, discrimination,
copyright, patents, consumer protection, employment, data protection, health and safety and
intellectual property law.
Environmental factors- Environmental factors are elements that are linked with natural
environment. Facebook is entirely connected with natural environment. In order to operate
officially it is very important for Facebook to conduct environmental analysis. The conditions
which are regarding sustainability of social media company that helps in improving and
satisfying the concerns of natural environment. Environmental factor also has great impact on
increasing complexities of waste disposal standards as company can apply more effective
policies for waste disposal. Another impact of environmental factor on Facebook is that they
have to face the threat of changes in climate which results in prompt transfer of business.
Facebook must accept all challenges as they work enthusiastically on personal media
platforms. In order to attain and achieve sustainable profits and strategic position in the future,
pestle analysis is the best tool.
2. Analysis the impact of micro environment as well as competition of Facebook.
Porter's Five Forces
It is a strategic instrument that helps in analysing the competition of a business. It helps
to make understand the current competition prevailing in the market. There are number of social
sites working, Facebook has immense level of competition like Twitter and LinkedIn (Jenkins
and Williamson, 2015). Facebook has various different platforms which assist it to compete
more straight with those challengers. For example- there are many people who prefer to use
Facebook's, What's App or its competitors Snap chats while professional users are more likely to
move towards Twitter, LinkedIn or Facebook' pages. In this manner, risk and challenges faced
by Facebook is moderate. Porter's five forces includes five forces which arr bargaining power of
buyers, bargaining power of suppliers, threat of new entrants, threat of substitutes and
competitive rivalry. The position achieved by company is the world largest position in online
social media business. Thus, Five forces model analysis will assist company to always satisfy
their customers in order to reduce the expected pessimistic effects of competition.
3

Bargaining power of suppliers- This is the force which determines the pressure exert by
suppliers on Facebook as it is very easy for suppliers to increase their prices. Suppliers of
Facebook also has bargaining powers but it is not so high as Facebook is large and strong enough
to control the pressure exert by suppliers. Suppliers includes every person who manage and build
their servers to the software that runs Facebook's various platforms of social media. The
bargaining power of suppliers is less but it does not mean that it is neglected. I order control the
bargaining power of suppliers, Facebook Inc. has maintained relationships with number of
suppliers so that if any suppliers increases the prices, they can switch to others. This is the best
way to control and manage the bargaining power of suppliers. High power of suppliers has direct
impact on the profit of company, as they increase the price of raw material, it will automatically
affect the profit of company as well as company has to increase the price of products too.
Bargaining power of buyers- This is the force which determines the pressure exert by
buyers on Facebook as it is the most essential factor that influence the entire operation and
functions of business. There are many other social sites available on internet, many users pursue
outside the family of Facebook, the less time they spend on Facebook or its other platforms it
gives customers of Facebook quite a fair sum of negotiation power (Salmela, 2016). The
bargaining power of buyers is high as in social media, all the apps like Facebook, Instagram,
Twitter and other are free to use, it does not incur any cost. So company is trying and giving
there efforts on actively using the site rather than checking once in a day. However, company is
working very hard to keep users actively use their services. Facebook is proving very advance
technology services which attract many users to use their services still customers of company is
exerting high pressure by demanding more and more. The type of pressure exert by customers of
Facebook are following- there is high availability of substitutes, there is low switching cost and
lastly high demand from their users. The primary source of revenue is advertisement of services.
Threat of Substitutes- This is force which has great impact on the profit and market share
of the company. There is moderate rate of shifting trend in social media. Facebook is also facing
high degree in threat of substitutes. Facebook has to always work in current and advance fashion
in order to retain its users. There are so many substitutes available for users of Facebook such as
television, radio and print advertisement. If Facebook is not updating its features on time, users
will more forward to others. It is the biggest challenge for company to retain its customers. There
are some other elements also which has created the strong threat of substitutes against company
4

are as follows- low cost of switching, high substitutes cost and moderate substitutes cost. It is
very easy for advertisers to pay for substitutes rather than paying for Facebook advertisement
like advertisement on Facebook pages. High availability of substitutes, strongly affects the
industry environment. Advertisement on television is quite expensive than Facebook
advertisement, So threat of substitute force is moderate.
Competitive Rivalry- Facebook is a leading in social media market but still they are
facing immense level of competition (Fleisher and Bensoussan, 2015). Facebook is fighting
competition with a different variety of social networks such as Twitter, LinkedIn, Instagram ad
many others. Facebook has a special features which others do not have like Facebook is targeting
all the demographic profiles equally. Facebook is using this model in order to identify the
strength and weaknesses of its competitors prevailing in market. In social media industry, the
competition is not for price of the products or services, the major focus of customers is on
features. Facebook is facing high risk as competition in social media market is at peak level. But
there are some factors which lead to moderate force if challengers against Facebook are as
follows- if there are small number of firms, if there is moderate variety of firms and if the cost of
switching is low.
Threat of new entrants- In social media marketing, all companies are offering
inexpensive services but threats of new entrant is low. There are two reasons why there is low
threat of new entrants, there are brand and well-known companies are operating like Facebook, it
is not an easy task to beat them and second setting infrastructure, branches in cities, networking
range, it is not easy for anyone to enter as well this business required regular fund. Threat of new
entrant is present but it is low. It is very difficult for new companies to attract people towards
there services. People are also more aware of sharing there personal pix and any other
information so security features is also required. Facebook is leading in all over the world, so it
is not easy for anybody to beat Facebook in the market. In order to enter in the market of social
media, brand recognition is required which attracts users. Enough scope and enough scale of
economies is needed to compete efficaciously with an organization as large as Facebook.
5

3. Analysis on internal environment of Facebook Inc. by taking resources, capabilities, core
skills and core competencies.
Resources, capabilities, core skills and core competence plays a vital role in order to
identify the several internal factors that has great impact on the performance and functioning of
Facebook Inc. (Schaltegger, Lüdeke-Freund and Hansen, 2016).
Resources
Human Resources- Human resources is the most significant resources for each and every
company. Facebook also recruit the most talented and skilled workers to perform different
functions of the company. The recruitment and selection procedure of Facebook company is
amazing, it focuses on hiring the most skilled and knowledgable person who is suitable for
particular job of work.
Technological Resources- The investment of Facebook Inc. on advancement and
promotion of technological is not been able to beaten by any other company. They focus on the
most useful and effective elements that assist in achieving the targeted goals and objectives of
company. Facebook is leading in market only because of its advance and latest technologies as it
always offers new and advance technologies to there users.
Financial Resources- Finance is the most essential resources in the all the companies.
While doing business in social media required huge amount of money. In this business, there is
regular need of fund as they have to invest regularly on advancement of technologies as well as
in innovations and creations. Facebook has to alter and modify its services, applications and
software which also required fund.
Infrastructure- In order to provide better and effective services to users, it is very
important for company to open up service centres and offices in various cities which required
money. Well developed infrastructure assist Facebook to achieve its goals and objectives of
company.
Core-competencies
Facebook Inc. has different and several core-competencies which aid its sustain leading
position in the social media market globally. Facebook has high knowledge and skilled and
developed support in the filed of Information technology in order to innovate features and
facilities to there users (Frösén and et.al., 2016). Facebook also have high as well as latest
developed technology.
6

Brand is another elements that Facebook has that it stay connected with there users.
Facebook is well recognised brand in the world. They maintain strategic relationships with their
users. Facebook never disappoint its users.
Facebook always make use of the latest technologies in their business in order to provide
satisfying social media networking services to there customers. Furthermore, there is another
core-competency for company is its development in technology which is the most necessary
components playing critical role in evolution and growth of a social media networking
organization.
Wide coverage area. Facebook is the well-known company across the world. Each and
every people in the world knows about Facebook as it has broad and wide coverage area. There
are millions of users of Facebook. It connects one person to whole over the world by sitting at
single place. The popularity of Facebook and its wide coverage enables company to further
development and growth of company.
Capabilities
It renders efficacious marketing opportunities to other companies- There are many
companies which help company to display there advertisement to many people. There is great
level of support by Facebook Inc. to many companies as advertisement and promotion work is
not cheap affairs on Facebook than compare to advertisement on television and newspaper
article.
Live video- Facebook is the first company that offers live video in the world. It is the
new and latest features that help people to share and interact to their friends, relatives and others.
It also provides Facebook messenger app which can be install in mobile phones and make easier
communication (Khan and Quaddus, 2015).
Likes and Reaction- In 2009, like button was introduced that help people to give their
reactions on status, story, photos, links, video and advertisement. This click shows that people
like the updated post. It also shoes how many people like their post including comments as well.
Core-skills
Facebook has genuine quality in its advanced aggregation with sites advertisement
applications. It always keeps its users and customers on top most priority. The users of Facebook
is increasing day by day amount as now billions of people are using Facebook. One of the
genuine attribute of Facebook is that it is a single maker of web-based social web phase where it
7

has the most raised consumers as opposition with various contenders. It expresses various scope
of business establishments and administrations on the web-based social networking through
which consumers or users can believes and keep secure trade data without any doubt. Because of
boosting the use of cell phones, use of Facebook application is inconsistently expanded in
current time by which Facebook have picked up the most raised income as compare with various
challengers in the sphere of web-based social networking. Facebook is the biggest surveillance
based enterprise which has mankind history in the world of internet. It has major two key
competencies that are capable to develop network people over internet and design most
important and advanced services for their users (Grant, 2016). It always focuses on the real needs
of their customers as well as they always serve them something creative and innovative.
4. Analysis of micro and macro internal environment of Facebook.
SWOT Analysis
Facebook works under a highly competitive market or business environment, there are
various factors that influence its function and performance. These factors are external as well as
internal. As external environment is already analysed above, its essential to identify internal
factors that affects Facebook's business operations. The SWOT Analysis approach can be
utilized as a part of determining Strengths, Weaknesses, Opportunities and Threats. SWOT
analysis is suggested as perceiving inside natural segments for business exercises of Facebook
Inc. In any case, assorted considerations are created for growing quality, decreasing inadequacy
and getting open entryways for defeating the happened issues. In such way, SWOT analysis for
separating business execution of Facebook Inc. can be perceived as:
Strength- Facebook Inc.'s popularity in social networks along with a strong brand image is a
major strength of the company in context to SWOT analysis. Facebook have real quality is its
high mix with sites promotion applications. It has in excess of a billion dynamic month to month
clients and it comprehends the real needs and needs of the clients. The referred to association has
incredible client encounter through which it serves quicker and brilliant administrations on the
web based life (Taghavifard and et.al., 2018). One of the real quality of Facebook is that it is one
ruler of online life stage where it has the most astounding clients when contrasted with different
contenders. It conveys differing scope of offices and administrations on the web-based social
networking through which clients can without much of a stretch trade data and keep secure it
Because of expanding utilization of Mobile telephone, Facebook application utilize is
8

consistently expanded in the present time through which Facebook has picked up the most
incredible income when contrasted with different rivals in the realm of web based life.
Astonishing things are the significant strong motivation behind Facebook Inc. Its picture regard
is high and has gigantic combination of things so they can serve the best to their clients. This
association has extraordinarily enormous extent of brands and essentially due to its wide range,
this association is creating well ordered.
Weakness -The organisations suffers form a huge number of weaknesses on the basis of its
nature of business. Facebook has significant shortcoming identified with the poor advancement
of ad and it has non-effective website customisation. It had been identified that the Facebook
protection and security alternative is extremely frail because of which numerous extortion
exercises happened on these sites. Another shortcoming is that Facebook creates its income just
by the notice. Its interpersonal organization absence of highlights as contrast with other online
networking stage and it has feeble assurance of the client's data (Forte, Forte and Pinheiro,
2017). Regardless of the way that they have effective arrangement of thing yet in the meantime,
young people are in no way interested by them since they induce that this association is only for
old developed people and their present exhibiting philosophy is leaving frightful impact on new
age. There are various other weaknesses of Facebook such as Imitable products and services,
Low diversification of business, Negative effects of online marketing or advertising on user
interfaces This association is up till now using old techniques as opposed to new systems that are
the reasons its things costs are growing rapidly.
Opportunities- A large of opportunities are easily available for the organisation to develop and
grow its social media business globally. Facebook have chance to grow its business choice in
the china market and increase substantial quantities of benefit and piece of the overall industry.
It's another open door is to build number of individuals utilizing Facebook by utilization of cell
phones. Versatile promoting is another open door for Facebook by which it will produce extra
income in its business. It's another open door is to wind up the main internet based life stage on
the planet and procure the greatest benefit and income when contrasted with Google. There are
various other areas for the company to grow and develop such as Product innovation, Market
development and Penetration as well as Business diversification. Facebook has a great
opportunity to collaborate with different marketers or companies to promote and advertise their
9

products on their social media website. Another opportunity for the company is to innovate and
develop new products such as mobile applications and Facebook websites to attract more people.
Threats - Facebook has real risk identified with the extreme rivalry as there are different other
web-based social networking stages which is utilized by the clients in the present time. In the
present time, there is ceaselessly expanding the quantities of versatile web clients that is one of
the real danger of the Facebook and it has moderate development rate of web based publicizing.
It has extremely feeble plan of action through which at some point, its business execution
adversely impacted. Another risk is identified with the mechanical improvement as because of
the mechanical advancement, a few new gear, gadgets and programming have been made in the
present time which may impact the decision and necessity of clients. In this manner, Facebook
has danger to adapt up to these progressions of innovation and development (Esteves, Roque and
Garrido, 2018). Facebook Inc. has the peril of losing its clients in competition. Other retail
contenders are developing themselves in little market while Facebook Inc. is driving the online
networking organizing industry. Facebook Inc. has the opportunity to upgrade their techniques
for showcase division by extending its branches all through the world. They furthermore have
possibility of inviting new ages by making contemplations and by disengaging clients by
offering more created internet based life administrations which will pull in more users.
SWOT analysis significantly impacts the fundamental administration of Facebook Inc. as
they have to make strong progression methods to hold their clients for advancement and
development of the association by grasping new frameworks. These new strategies will help
them in developing among youth and besides constrains their manual cost with the objective that
they can obtain the most extraordinary advantage.
10