Strategic Management Report: Analyzing Facebook's Strategic Position

This report provides a strategic analysis of Facebook, examining its current challenges and opportunities. The introduction outlines Facebook's founding, growth, and the challenges it faces, including data privacy, advertisement saturation, and monetization pressures. A PESTEL analysis assesses the political, economic, social, technological, environmental, and legal factors impacting Facebook's operations, highlighting political barriers in China and economic growth opportunities. Porter's Five Forces analysis evaluates competitive rivalry, buyer and supplier power, the threat of substitutes, and new entrants, revealing high competition and the impact of customer and advertiser power. The report then explores Facebook's strategic capabilities, including its brand identity, customer base, and focus on innovation. The VRIO framework assesses the value, rarity, imitability, and organization of Facebook's resources and capabilities. The report concludes with proposed strategies to address the identified challenges and leverage opportunities for future growth, including enhancing data privacy, improving revenue streams, and maintaining user engagement.

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Table of Contents
Introduction of organization and current challenges.......................................................................2
Macro trend analysis-......................................................................................................................3
PESTEL analysis.........................................................................................................................3
Environmental analysis................................................................................................................5
Porters five force analysis............................................................................................................5
Capability analysis...........................................................................................................................7
Strategic capabilities....................................................................................................................7
VRIO criteria...............................................................................................................................8
Competitive implications.............................................................................................................9
Proposed strategy and conclusion..................................................................................................10
Conclusion.....................................................................................................................................11
References......................................................................................................................................13
Appendixes....................................................................................................................................16

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Introduction of organization and current challenges
Facebook is an American company that offers to its users online social networking
services. The company was founded in the year 2004. The founder of the company is Mark
Zuckerberg, Eduardo Saverin, Dustin Moskovitz and Chris Hughes. All the founders of the
company were students of Harvard University(Galpin, Whitttington and Bell 2015). The
company has become one of the largest social networking platforms in the world. It has more
than one billion users since the year 2012. Half of the users are using Facebook every day. The
headers of Facebook are located in California, Menlo Park. The company is highly aspiring and
is made up of talented and entrepreneurial professional, along with the clefs and the distributing
partners of the company every day. The company is highly inspired with the positive and open
culture and it empowers the employees of the organization to make a different in each
department of the organization. The company aims to continue their business in a sustainable
manner. The company offers free access to Facebook without any charges and it earns most of
the money from Facebook advertising on the website (Genoveva and Siam 2017). The social
networking sites has many components including a space for the users to post pictures, video’s
on their timelines, users profile pages, the users are provided with an opportunity to share the
contents on their timelines with their friends and family, they can post images and messages,
further, it has facility that enables the users to get an alert on their phones about the current
status, situation of the friends of the users. Moreover, Facebook allows its customers to chat with
one another on the platforms and send private messages. The users can show their approval of
the content in their timeline by hitting the like button and comments on the comment section of
the content on Facebook. The social networking site Facebook also provides various security
options for the safety and privacy of every user(Bello-Orgaz Jung and Camacho 2016).

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Facebook is facing various challenges being the most used social media networking sites.
The company is increasingly facing challenges of general data protection of the users and the
advertisers on the platform. The company has been facing too many advertisement load
saturation in the news feed of the users since a long time. It leads to slow down, however
Facebook has managed to lower ads in the platforms with high average ad prices. The price of
the posting advertising on Facebookis increasing demand for the company’s ads inventory. The
company has to find and implement other ways and techniques to improve and grow its revenue
at a higher rate(De Wolf, Willaert and Pierson 2014).This remains to be a challenge for
Facebook. There is extremely high mouthing active user on the platform of Facebook, it keeps
growing the user base, and it has become a challenge for the company and keeps the users
engaged. Huge user base of the company has become different for the company to manage its
business ethically and efficiently. The company also faces monetizing pressures, engagement is
declining, and therefore, the company is increasing facing the challenge to monetize more of its
products. The company is also facing governance problems and troubles, as there are more
negative reports every week, the employee morale of the company is hitting new lows. There
company is facing decline of trust in tech as well (Vorvoreanu 2014).
Macro trend analysis-
PESTEL analysis
The PESTEL analysis of Facebook determines the growth, opportunity that is faced by
the company in the international market; it also determines the threats in the macro environment
and its impact on growth achieved by focusing on innovation and other approaches by Facebook.

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Political factors: There is a political stability in USA and the developed countries. There is a
popular governmental support for increasing globalization in the external environment of
Facebook. However, there is a political barrier in the Chinese market, which has posed to be a
threat for the company, there is an increasing political action on the online data which has also
posed to be threat for the company(Genoveva and Siam, 2017). The political stability in USA is
an opportunity for the company, as it can continue to diversify its business and expand its social
media platform. It has an increasing opportunity to display its advertising service globally. Since
the company is facing challenge of political barrier in china, the company potential growth and
expansion is limited. Additionally, regarding the data privacy policy and the security issues faced
by the business, the government is increasingly interrupting the service providers. They political
people are increasing working to limit the online data sharing and commenting. This factor has
the possibility to slow down the growth and expansion of the company(Grant 2016).Thus the
company needs to enhance its privacy policy and security of data for the users and continue to
negotiate with the Chinese government to enable the company to display its advertising in the
country.
Economic factors: The economic conditions in USA shape Face book’s business growth and
expansion.The company’s business operations are highly dependent on the economic situation of
the country it operates. This section analyzes the economic conditions of the organizations and
the macro environment. The company has an opportunity as there is an increasing stability in the
developing countries and there is a rapid economic growth in most of the developing country in
which it operates. There is an increasing disposal income of the users. It has the opportunity to
increase its market penetration in the developing countries along with increasing economic
growth and stability(Hamel and Prahalad 2013).Further there is a rapid economic growth of the

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country which can enable the company to improve its infrastructure inclosing its
telecommunication services. The economic external factors of the company support expansions
of accessing the social networking site Facebook. Additionally, the disposal income of the users
of Facebook in the country might improve the capability to buy device that supports the services
provided by the company(Haucap and Heimeshoff 2014). This situation also enables the
company to further expand its business. Moreover, this situation also supports the company’s
generic competitive strategy and improves the intensive growth strategy of the company. Thus
the company has major opportunities to expand its operations by penetrating the market.
Environmental analysis
Porters five force analysis
Competitive rivalry or competition
There is high degree of competition in the market, the company is highly impacted by the
strong force present by the competition forms, and there is high level of aggressiveness of the
existing companies including YouTube, Instagram.There are small amount of companies which
offer similar advertising opportunity to that of Facebook (Grant, R.M., 2016) . However,
YouTube is the biggest competitors of Facebook; it offers targeted online advertising service to
its viewers and online advertisers. This imposes moderate force in the industry.
Bargaining power of the buyers or customers
The customers of Facebook impose pressure on the company. The advertisers on
Facebook are the primary source of revenue for the company, as there are various substitutes
available they can easily switch the services (Keegan and Campus 2016).Such condition in the
market exerts a strong force against the business, despite having a strong popularity and status.
The low switching costs makes it easier for the customers to shift from the company’s offerings

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and services. However, the high demand for online advertising slightly weakens the bargaining
power of the customers.
Bargaining power of the suppliers
There is moderate size of individual suppliers with moderate force;there is moderate
population of suppliers in the market with moderate force and moderate overall supply.
However, the size of the suppliers is moderate in size. This imposes moderate intensity of force
on the services offered by the company. Facebook requires servers and network technology
along with the office supplies, the large supplier population as an external factor that has a weak
force on the company(Ozuem 2016).The overall supply is high which has a weak force to the
company.
Threat of substitutes
Availability of substituteservices is high in the market and it reduces the revenues and
strengths of the company. There is a low switching costs which enables the customers to easily
switch thecompany’s service with other company including YouTube, Twitter. However, the
substitutes available in the market have very limited performance and have significant cost
difference as compared to the company’s products(Silva, F.M.B.C.H 2013).Facebook is highly
popular with wide user base, therefore, the advertisers has less possibility to switch the service.
Threat of new entrants
Facebook faces negative effects of the new entrants in the industry. The new firms exert a
strong force on the company. However, there is high cost of brand development and high cost of

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customer loyalty. It is difficult to gain popularity of the new entrants in less time(Van Dijck
2013).
Capability analysis
Strategic capabilities
Facebook has a brand identity with huge customer base; this is a competitive advantage
of the company. It highly believes in profitable growth along with responsibility of the user’s
data. They realize their visions and invest in long term strategy of the divisions and brands which
helps the company to deliver growth and expansion for the benefit of the entire stakeholder. It is
the part of the company’s strategy to grow their business in terms of sales, margin and capital
efficiency by improving communication and interactions with the users and influencing
globalization (Weedon, Nuland and Stamos 2017).It is the strategic capability of the company to
have a focused approach to innovation, driving the efficiency of the organization and increase its
investment in the digital and innovative advertising. It is the part of their strategy to
development routes to the market, and e-commerce for the advertisers on Facebook (Grant
2016).
Consistency: The Companydelivers consistent growth and generates high revenue in the
company by continuously investing in improving the user experience on Facebook. This is
considered to be one of the critical success factors of the company.
Competitive: the strategy of the company is highly competitive in nature. By investing in
innovation, the company can growth its market share value and it enables the company to enter
into new countries and reach to the entire user base(Young and Quan-Haase 2013).

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Profitable: The Company continuously improvements in the operations and enhancing the
service provided to the Facebook users, which enables the company to gain loyal customers with
higher returns on investment, this capability of the company’s strategy act as a critical success
factor of the company. It provides an extra fuel for growth (Tafesse 2015).
Responsible: The Company is highly responsible, it continuously makes amendments in its
operations to improve data security and protect the privacy of the customers. It regularly filters
the fake and irrelevant comments on the platform(Tufekci 2015).
VRIO criteria
Value: Facebook creates value with its competitive pricing strategy; the company has a
leadership vision in countering the challenges tactfully. For successful execution the company
access to the critical raw material. It has increasing brand awareness and popularity.
Resources: Facebook have a global and local presence. Other resources include the intellectual
poverty, copyrights, and trademarks(Van Dijck 2013).It has access to cheap capital. It enables its
users to access to the information’s and entertaining contents while protecting their privacy and
safety.
Rare: It is not rare, as many competitors are investing into digitalizing operations. The
competitors are also targeting globalization. Facebook has rare strategy especially in the target
segment in which it operates. It has a dominant market position. The firm’s strategy is critical
success factor for the company’s growth.
Imitation: Face book’s pricing strategy can be imitated easily by the competitors. The leadership
strategy of the company cannot be imitated by the competitors. It is difficult to imitate the

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strategies of the company, however, it is not impossible to imitate. The vision of its leadership
position cannot be imitated by competitors(Hamel and Prahalad 2013).
Competitive implications
To sum up, Face book’s leadership strategies and market penetration strategy acts as a
competitive advantage for the company. Ithas a strong global presence. It is the strongest brand
in the social networking platforms and widely used platform. Thisstrengthens of the company
enable the company to penetrate the market and increase its competitiveness. The broad range of
components on Facebook shows the extent to which the company can grow its business. Through
the years of international expansion, the company can increase its international expansion; this
strength of the company has increased its market presence and increased its competitiveness in
the market. The ease to access and low pricing strategies reinforces the brandpopularity(Kapp,
Peters and Oliver 2013).
However, Face book’s pricing strategy has temporary competitive advantage. The
company highly invests in service development process, but its competitors can imitate its
strategies easily especially its pricing strategies. Facebook has strong alignment of activities as
its corporate strategy; however, it can further build on it(Keegan and Campus 2016)..
Proposed strategy and conclusion
Considering the opportunity and threats faced by Facebook the company can adopt new
strategies and prioritize the strategies in order to grow and expand. It is highly recommended that
the company’s must include in its strategy as a precaution against the external factor of rising
security issues and safety concerns of the users. Facebook must take it as a factor or as an
opportunity to improve the quality of service offered by the company(Haucap and

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Heimeshoff2014).The company needs to improve the levels of security and data protection
software’s. It is recommended to counter the threat of risingsafety concerns as it empowers the
company’s competitors in the market. The company needs to take measurements concerning its
growth and expansion policies. It can bring necessary innovation and business sustainability in
company’s strategy and further improve its pricing strategies. The company must implement
strategy which ensures user privacy and safety. This will enable the company to improve its
strategy and service provided. The company needs to focus on the importance of strategic
reforms and increase opportunity for the online advertisers to use the service efficiently and in a
most ethical way possible(Silva, F.M.B.C.H 2013). It is recommended to improve the strategies
to protect the company’s operation to counter the issues and challenges faced by the company,
by identifying the external analysis. Since there is an increasing governmental breakdown and
increasing regulatory implementations by the government, it must imitatepolitics and filter
irrelevant news, comments and contents on its platforms. This will ensure safety and ensure
privacy of the users. It is also recommended to address the issues and continue to penetrate its
market. The company needs to develop and improve the products and service which supports the
online advertisers on Facebook to imitate and influence new revenues in the organization. The
company also needs to diversify its business and this can reduce the market risk exposure of the
company(Tafesse 2015).
Conclusion
From the above analysis, it can be concluded that there are various opportunities and
threats faced by Facebook there is an opportunity of increasing trend of online marketing and
advertising.Therefore the company can influence its business activities to exploit this
opportunity. Considering the economic stability, the company can increase its market size and

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penetrate the market. It has been analyzed that there is increasing privacy issues and safety
concerns among the users. It is recommended to ensure the safety and privacy concerns on
Facebook .With the advancement of the ethnology, there is increased competition in the market.
Strategy can be implemented to decrease the operational costs of the company. Strategy must be
implemented to improve the service provided by Facebook.Bringing in new techniques and
software in the organization can increase efficiency of the business. The strategies have been
describes in the report. It has been analyzed that it is essential for the company to improve the
safety standards and true, genuine content on the platform,to counter the threat and exploit the
opportunity in the business. To counter the threat of rising competition in the market, the
company needs to highly improve its service and ensure competitiveness of its service.

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Haucap, J. and Heimeshoff, U., 2014. Google, Facebook, Amazon, eBay: Is the Internet driving
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Tufekci, Z., 2015. Algorithmic harms beyond Facebook and Google: Emergent challenges of
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Appendixes
Figure 1: Porters Five Force Analysis of Facebook
Figure 2: External environment analysis

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