Business Environment of Facebook: VRIO, PESTEL, and Stakeholders

This presentation provides a comprehensive overview of Facebook's business environment. It begins with an introduction to the company, founded in 2004 by Mark Zuckerberg and others, and its evolution from a student-focused online service to a global social networking giant. The presentation details the forms of business organization, highlighting Facebook's partnership structure and its advantages. It explores the initial purpose of Facebook, which was to connect students, and how this mission has evolved to building global communities. The presentation then identifies and analyzes Facebook's key stakeholders, including users, employees, advertisers, communities, and governments, and their respective objectives. The core of the presentation includes a VRIO analysis, assessing Facebook's resources and capabilities, and a PESTEL analysis, evaluating the political, economic, social, technological, environmental, and legal factors impacting the company. The presentation concludes with a summary of the key findings and references relevant academic sources.

Introduction to the Business
Environment

Table of Contents
 Introduction
 Forms of business organization adopted by Facebook
 Purpose of Facebook when it was formed
 Facebook’s stakeholders and their objectives
 VARIO and PESTEL Analysis
 Conclusion
 References

Introduction
Business environment of an organization involves all of the internal as well as
external factors that can affect its functions. This can include the employees,
management, customers supply as well as demand. The business environment
can either be external to the company or external to it. This presentation is
based on the organization Facebook, which is an American company offering
various services related to social networking.

Cont…
The company was founded in the year 2004 by Mark Zuckerberg, Eduardo
Saverin, Dustin Moskovitz, and Chris Hughes. It was founded as Face Mash,
an online service for students so that they could judge the attractiveness of
fellow students. The presentation explains the different forms of business
organizations along with the one that Facebook has adopted since its
inception.

Forms of business organization adopted by Facebook
Sole Proprietorship – A lot of small businesses are started by sole proprietors or owners
wherein they receive all the profits that are earned by them. Also, the owner of the
company makes all important decisions for it and has complete control over the business
operations.
 Partnership – In a partnership, one or two people share the ownership of a
company and collectively make decisions for the same. Also, all the profits that are earned
by the company are shared equally by them. Facebook has adopted partnership form of
business organization since its inception. A partnership business organization is easy to
establish.

Cont…
Corporation – A corporation can be referred to as unique entity, separate from those
who own it. A corporation can be taxed, sued and enter into contractual agreements.
The corporation has a life of its own and does not dissolve when ownership changes.
 Limited Liability Company - A limited liability company or LLC is a hybrid
business structure that provides the limited legal liability of a corporation and the
operational flexibility of a partnership or sole proprietorship. However, the formation
is more complex and formal than that of a general partnership. Forming an LLC
requires the business owner to file legal paperwork.

Cont…
There are various differences between the different forms of business
organizations that are discussed above. For example, in case of a sole
proprietorship, the owner of the business is responsible for making all the
important decisions for the company whereas in partnership, both the owners
have to make decisions that are mutually agreed upon. Apart from this, profits in
a partnership must be shared by the partners which is not the case in sole
proprietorship. Similarly, a limited Liability Company can have an unlimited
number of owners whereas in a C-corporation, there can be a transfer of
ownership.

Purpose of Facebook when it was formed
Back in the year 2003, when the respective company was formed, its main
purpose was to offer online service for students to judge the attractiveness of
their fellow students. But since Mark Zuckerberg, the primary developer had
violated the policy of the university related to acquiring resources for the
service, it was shut down. But the success of the online service within two days
prompted Mark to register the URL of the company. As a result, a new social
network was created by him along with three fellow students of the Harvard
University.

Cont…
It was launched with the name Facebook in the month of February 2004.
Facebook proved out to be a great success among the students of the Harvard
University along with an increased popularity among students belong to other
universities such as Yale and Stanford. The students could sign up for the
service and post their photographs as well as their personal information like
class schedules etc.

Cont…
The purpose of the respective company, Facebook has changed overtime from
the time it was formed. The company has a new mission of giving people the
power of building communities and thus, get close to each other rather than
making the world more open as well as connected. Facebook today, stands for
bringing people close and building a global community. When it began, the
idea was not controversial.

Cont…
Every year, the world got more connected and this was seen as a positive
trend. But now, across the world there are people left behind by globalization,
and movements for withdrawing from global connection. There are questions
about whether a global community can be made that works for everyone, and
whether the path ahead is to connect more or reverse course.

Facebook’s stakeholders and their objectives
Being one of the largest online services providing company, Facebook has a
lot of different stakeholders who have their own objectives. The major
stakeholder groups of the company include members or users, who are the
most important for the company, employees, advertisers, communities as well
as the governments. Facebook’s online social media service has billions of
monthly active users. These users or members of the social network are the
stakeholder group that receives the company’s top prioritization in corporate
citizenship.

Cont…
Users are significant in CSR because they determine the popularity and
attractiveness of the company’s display advertising service. Facebook Inc.
values employees in terms of their contributions to the social media business.
These corporate citizenship stakeholders are significant in affecting the
company’s evolution, especially in developing and improving products. The
CSR interests of employees include high compensation and career
development.

Cont…
Facebook Inc.’s corporate citizenship efforts give the least priority to
communities as a stakeholder group. These stakeholders significantly affect the
company by influencing the perception of users/members and advertisers.
Communities are interested in developmental support from companies.
Facebook addresses such CSR interests through green technology and
Internet.org, which was launched in 2013 as a way to increase online access in
developing countries.

Cont…
Governments are significant CSR stakeholders because they impose
requirements on the social media business. This influence keeps the company
in compliance with governmental policies and interests, which include
regulatory requirements.

VARIO and PESTEL Analysis
VRIO Analysis
Resources Valuable Rare Imitable Organize
Global Presence ✓ - - -
Large Audience ✓ ✓ - -
Technological Innovation ✓ ✓ ✓ -
Brand Awareness ✓ ✓ ✓ ✓

Cont…
Global Presence
Facebook enjoys global popularity and its audience from the emerging markets has
grown during recent years driving higher growth in revenue. Its global accessibility is a
critical source of competitive advantage which brings marketers flocking to the
platform for marketing and promotions of their products and services.
Large Audience
Facebook’s overall audience has undergone impressive growth during recent years
and the company has seen a rapid surge in its users from the Asia Pacific region. The
number of monthly active users on Facebook is higher than 2.5 billion.

Cont…
Technological Innovation
The business of tech giants like Facebook and its competitors depends
heavily in research and development since competition has grown highly
intense and continuous investment in R&D is important to grow the level of
user engagement.

Cont…
Brand Awareness
Facebook’s brand awareness is unquestionably very high which is
a result of the company’s focus on user experience. The company has
continued to invest in user experience to find faster growth and expand its
user base from around the world. Higher brand awareness has also resulted
in higher worldwide sales and faster growth in advertising revenue.

Cont…
PESTEL Analysis
 Political Factors – In greater conservative international locations, Facebook is
visible as a device to push certain agendas and help human beings unite in opposition to
political parties. To prevent people from uniting, in addition to the unfold of incorrect
information, a few countries have restrained Facebook get admission to their residents.
 Economic Factors – The strong US dollar has cost Facebook millions in
foreign currencies. Specifically, Facebook has lost more than $100 million USD
worldwide. Costs and expenses are on the rise as the company continues to expand and
employ new workers.

Cont…
Social Factors – Not to mention the data breaches affecting millions of users
isn’t helping Facebook’s retain favor amongst their users. People are more wary
about connecting other accounts and websites to Facebook. Yet, billions of people
still use Facebook every day.
 Technological Factors – The platform relies on the internet. Without it,
Facebook wouldn’t even exist. And it’s more than just a website now. The
company offers a standalone messenger app to talk with people on your friend’s
list, regardless if you log into your Facebook or use it.

Cont…
Environmental Factors – Most of Facebook’s emissions are from the company’s
American data centers. However, it’s been rather low over the last few years,
compared to other companies. Facebook still uses coal power to generate power in
the data centers, but they also use gas and nuclear as well.
 Legal Factors - Data breaches are what Facebook is becoming most
known for, at least if you search through recent articles about the company. And the
consistent trouble with keeping users’ information out of the clutches of scammers
is affecting Facebook’s reputation.

Conclusion
From the above presentation, it can be concluded that Facebook is a leading
online social networking company that offers a variety of services to its users.
The company is a business organization in the form of partnership, wherein all
the important decisions that are made by the partners are mutually agreed upon.
Also, the company has various stakeholders such as its users, suppliers,
employees, communities as well as the governments. Also, there are various
factors, both internal as well as external that can affect the operations of the
company.

References
 Alotaibi, Y. and Liu, F., 2017. Survey of business process management:
challenges and solutions. Enterprise Information Systems,. 11(8). pp.1119-
1153.
 Liu, Y. and Vrontis, D., 2017. Emerging‐market firms venturing into
advanced economies: The role of context. Thunderbird International
Business Review. 59(3). pp.255-261.
 Luiz, J. M., Ganson, B. and Wennmann, A., 2019. Business environment
reforms in fragile and conflict-affected states: From a transactions towards
a systems approach. Journal of International Business Policy. 2(3).
pp.217-236.

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