HI6008 - Analyzing Advantages and Disadvantages of Social Networks

This report examines the advantages and disadvantages of using social networks in business, focusing on the case of Starbucks Corporation. It begins by introducing the increasing importance of social media due to the rise in internet and smartphone users, highlighting the opportunities and challenges for businesses. The report provides a literature review discussing the growth of social media users, advertising revenue, and its impact on traditional marketing. It elaborates on the advantages of social networks, such as effective communication channels, marketing tools, market data collection, and employee recruitment, using Starbucks as a prime example of a company leveraging social media for customer engagement and brand building. The report also addresses the disadvantages, including cyber-attack vulnerabilities, and the need for a clear social media strategy. The analysis draws on various studies and examples to provide a comprehensive understanding of the role of social networks in modern organizations.

Running head: SOCIAL NETWORKS 0
Business Research
Advantages and Disadvantages of Using Social Networks in Business

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Table of Contents
1. Introduction.........................................................................................................................2
2. Project Objective.................................................................................................................2
3. Project Scope......................................................................................................................2
4. Literature Review...............................................................................................................3
5. Conclusion..........................................................................................................................9
6. References.........................................................................................................................10
7. Appendix...........................................................................................................................14
List of Figures
Figure 1: Global Social Media Statistics..................................................................................14
Figure 2: Social media sites users............................................................................................14
Figure 3: Social Media Advertisement Revenue (in US dollar billion)...................................15
Figure 4: Television Advertisement Revenue in the United States (in US dollar revenue)....15

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1. Introduction
Over the past few years, the growth in the number of internet users has increased with the
popularity of smartphones, and it has resulted in increasing the number of social media users.
Trainor et al. (2014) provided that the growing number of social media users creates new
business opportunities for enterprises because they can reach millions of people directly.
While using social media sites, companies receive a number of advantages which provides
them a competitive advantage such as effective communication channel, marketing tool,
collection of market data, recruitment of employees and business expansion. However, there
are a number of risks associated with social networks which result in increasing challenges
for organisations such as the threat of cyber-attacks, cyberbullying, insider threat, and
requirement of clear strategy (Stelzner, 2014). This report will evaluate the case of ‘Starbucks
Corporation’ to understand the role of social networks in modern organisations. This report
will analyse advantages and disadvantages of using social networks in business by evaluating
the example of Starbucks. Examples of various other organisations which are affected by
social media sites will be analysed in the report as well.
2. Project Objective
Firstly, this report aims to understand various benefits of using social networks in business by
evaluating the example of Starbucks Corporation. Further, this report will evaluate various
drawbacks relating the use of social networks. Examples of different companies along with
Starbucks will be given in the report in order to understand each of these factors. The goal of
this report is to analyse different studies on the topic to understand how advantages and
disadvantages of social networks affect businesses.
3. Project Scope
This report will understand the advantages and disadvantages of social networks in business
by examining the social network strategies of Starbucks Corporation. This report will focus
on secondary research on this topic to understand its importance in modern enterprises.
Further, this report will include examples of various other companies that are affected by the
use of social network strategy in business.

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4. Literature Review
Social networks are referred to internet-based social media programs through which
individuals can interact, share and communicate with others by using an internet connection.
As per Stieglitz et al. (2014), in the past two decades, the number of social media users has
increased substantially with the popularity of smartphones and online based services.
Currently, there are over 4 billion internet users from which more than 3.196 billion are
active social media users (Shayon, 2018). Moreover, there are over 2.9 billion people who
actively use social media through their smartphones (Figure 1). The social media sector is
dominated by Facebook with over 2.167 billion active users (Shayon, 2018) (figure 2). There
are many other popular social media sites which are used by millions of users such as
Instagram, YouTube and Twitter. Castells (2015) provided that in terms of revenue
generation, social media sites are giving competition to traditional forms of marketing and
business research tools. For example, in 2017, the social media advertising revenue was more
than US$41 billion, and the profits have substantially as it was US$32.91 billion in 2016
(Statista, 2018a) (Figure 3). On the other hand, television advertising revenue in the United
States for 2016 were US$70.6 billion, however, they are expected to grow only US$75.2
billion by 2021 because corporations are adopting social media marketing (Statista, 2018b)
(Figure 4).
These statistics show how massive social sites have become, and they offer a potential market
to organisations for performing various business practices such as promotion, selling, market
research, advertisement and collection of feedback. Paniagua and Sapena (2014) provided
that the numbers of corporations that use social media sites to perform business activities are
increasing because they understand the value of effective use of social media in business.
However, many organisations are avoiding using social media sites because of various risks
associated with them. But, despite many limitations, the number of corporations adopting a
social media strategy is increasing rapidly. Jussila, Karkkainen and Aramo-Immonen (2014)
provided that enterprises use social media marketing because they can customise their
advertisements based on the preference of their users by collecting their data however this
option is not available in any other form of marketing such as television and billboard.
Effective use of social media platform generates a competitive advantage for companies
which improve their market reputation and overall profitability. Many corporations have

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generated a competitive advantage in the industry by effectively using social media for
interaction and promotion to customers; Starbucks is a good example.
Starbucks Corporation was founded in 1971, and its headquarters is situated in Seattle,
Washington, United States. It is an American coffee company, and it operates in more than
27,339 locations in more than 62 countries (Stoffel, 2018). The company use social media
platforms for more than just a business tool. It uses social media sites to connect with its
customers and share relevant content with them which result in increasing its fan following
on social media sites. The corporation has generated a massive fan following on social media
sites. Collectively, it has over 65 million social media followers in three of the major social
media sites which include Facebook (37 million), Twitter (12 million) and Instagram (16
million). Kohli, Suri and Kapoor (2015) stated that the company focuses on communicating
and interacting with its customers through social media sites rather than promoting their
products which result in increasing their loyal fan base. Mainly, the corporation uses social
networks due to their numerous advantages which result in increasing their effectiveness.
The primary advantage of social networks is that they provide an effective channel of
communication to corporations through which they can communicate with their customers,
employees and other organisations. Ashley and Tuten (2015) argued that it has become
substantially easier for organisations to communicate with their customers by using different
social media platforms such as Facebook, Twitter, and Instagram. They can directly send a
message to their customers to tell them about their new offer or any other news which might
effective them. Furthermore, social networks provide two side communication channels to
organisations which mean customers can also easily share their opinions with the company.
Moreover, corporations use social networks to communicate at the workplace by using
platforms such as Google Hangouts and Skype. Swani et al. (2017) stated that by using social
media sites, corporations can share information or details with employees or customers in
other countries without any hiccups or lags. In case of Starbucks, the enterprise uses its social
media presence to communicate with its customers and share relevant content with them. The
company shares content of its fans and communicate with them directly so that they feel
attached to the organisation. Furthermore, the company shares relevant offers and deals with
its customers rather than showing unnecessary advertisement which annoys them. Lam,
Yeung and Cheng (2016) provided that the company also encourage its employees to
communicate through social media with each other during work because it is more efficient
and reliable way of communication. It has also established in social media interaction team

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that focuses on creating a positive relationship with employees and customers by using social
networks (Starbucks, 2014).
Starbucks understands the significance of social media as a communication tool, and it
effectively uses it for creating a strong relationship with its customers and employees which
increase its loyal fan following and brand image. Felix, Rauschnabel and Hinsch (2017)
stated that other than a communication tool, social networks can be used as an effective
marketing tool by the enterprise. One of the primary reasons for the success of social media
sites is that they are free to use by everyone and anyone can create their account on social
networks. According to Bennett (2014), nine in every ten organisations operating in the
United States use social media sites. The companies can easily create their account on social
media sites and their fan following starting following them. People aged 18-34 are more
likely to follow the brand on social media sites, and they are more likely to recommend them
to others if they had a good social media service experience (Hainla, 2018). Similarly,
Starbucks has created an account on almost each social media platform so that it can connect
with its fan base. The followers of the enterprise include diehard fans that follow and are
genuinely interested in the products of the enterprise. As per Hudson et al. (2016), the
company can simply share a post about their new product or offer on each of their social
media accounts, and it automatically reaches to its targeted audience. Furthermore, social
media sites collect personal data of its users to learn about preferences and likes which
enables them to show customised advertisements to them which are based on their
preferences.
Starbucks use social media advertisements to target people who like coffee and interested in
its other related products. Wu (2017) provided that the enterprise focuses on creating positive
relationships with fans online rather than continuously showing them advertisements which
can be annoying. As discussed above, social media sites collect personal data of users which
contains information regarding their preferences and personal likes and dislikes. Lamberton
and Stephen (2016) state that these market insights are crucial for the success of corporations
since they can use this data to create business strategies that are targeted towards customers
based on their preferences. Furthermore, social media sites connect millions of customers
directly to a company, and they can use this platform conduct market research by collecting
data from their followers. Many social media sites enable enterprises to conduct a poll on
their account in which anyone can participate and easily share their feedback. Cardon and
Marshall (2015) provided that before developing new products, corporations can conduct a

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poll to learn about the preferences of their customers and create products that fulfil their
demands. Furthermore, social media sites provide two-way communication channels between
enterprises and customers that mean followers can share their feedback and opinions
regarding a firm’s products or services directly through their social media account. Similarly,
Starbucks Corporation uses social media sites to collect market insights about their products
which are difficult and expensive to collect otherwise.
Many organisations also use social media sites to hire employees because they can connect
which people across the globe, and they can communicate with potential candidates from all
across the globe. Pfeffer, Zorbach and Carley (2014) provided that they can post
advertisements regarding job opening and required qualification on their social media
accounts and potential candidates can easily apply for the job. The human resource
department can interview candidates that applied from abroad by using social networks which
assist enterprises in hiring talented employees from across the world. The use of social
networks in business provides a number of advantages to corporations, however, there are
many disadvantages of using social media sites as well which negatively affects the growth of
an enterprise. As per Lau, Xia and Ye (2014), the main issue associated with social media
sites is the vulnerability of cyber-attacks. Social media sites connect users through the
internet connection and cybercriminals can disrupt such connection to hack into people and
organisations social media accounts. Cybercriminals target the social media accounts of large
organisations to collect their confidential data and gain an unfair advantage. Along with the
popularity of social networks, the risk of cyber-attacks has increased as well.
Many corporations have suffered substantial financial losses because cybercriminals hacked
into their social media accounts. For example, HBO’s social media accounts were hacked by
cybercriminals that resulted in the leak of the script of their popular TV series “Game of
Thrones” (Kharpal, 2017). Similarly, social media accounts of people and celebrity can also
get hacked, for instance, social media account of Mark Zuckerberg, Founder, Chairman and
CEO of Facebook, were hacked more than three times in 2016 (Mathews, 2016). Crawford
and Gillespie (2016) stated that although social media sites are finding new ways to stop
hackers by increasing their website security, however, cybercriminals are finding new ways
to hack the accounts of people and organisations. The mobile application of Starbucks was
hacked in which private data of customers were leaked and hacked conducted fraud to gain
an unfair advantage (Morris, 2017). Therefore, cybersecurity is one of the primary issues
relating to the use of social media sites in organisations and people.

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Another disadvantage of the use of social media sites is that it provides an open platform to
everyone in the world, and they can share their opinions both positive and negative on the
social media sites which lead to cyberbullying. As per Gregoire, Salle and Tripp (2015), there
are a number of instances in which corporations people started posting negative comments
regarding a company’s products or services which resulted in reducing their market
reputation. People who did not like products or services of a company can easily create fake
accounts and share negative feedback regarding the organisations which affects its
profitability. Many people criticise and post negative comments on social media accounts of
Starbucks which negatively affects its brand image. Furthermore, the actions or steps taken
by organisations on social media sites are available for everyone across the globe, and any
mistake can reduce brand image and profitability of a company. Cheung, Lee and Chan
(2015) provided that many times, employees made a mistake while sharing content on social
media sites which can affect the profitability of an enterprise. Studies have shown that insider
threat is the primary reason (in more than 60 percent cases) based on which cybercriminals
are able to hack into the accounts of organisations (Figure 5). Any mistake or carelessness of
an employee could cause huge financial loss of an enterprise because cybercriminals could
collect and leak confidential data of an organisation.
While using social networks, organisations are required to develop a straightforward strategy
in order to avoid confusion and effectively use social media strategy. Gaspar et al. (2016)
provided that the lack of clear strategy can increase challenges of companies while using
social media sites. Companies can use social media sites in many different ways and in order
to avoid confusion they should create a clear strategy. For example, Starbucks has established
a clear social media strategy based on which they focus on creating a positive relationship
with customers and creating a solid fan following rather than promoting their products. On
the other hand, if corporations are only using their social networks to advertise their products
to customers than it can negatively affect their profitability. According to Langenfeld et al.
(2014), any mistakes on social media sites did not go unnoticed, and they can reduce the
profitability of an organisation. For example, an advertisement of PepsiCo in which it was
shown that people could stop police violence and protests by sharing a soft drink. The
company had to take down the advertisement, and it resulted in causing substantial financial
loss to the firm (Malone and Baysinger, 2017) People use social media platforms to criticise
the company’s actions, and they started boycotting its products which reduce its profitability.

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Therefore, it is necessary that corporations develop a clear strategy while using social media
account to avoid any negative feedback.

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1. Conclusion
In conclusion, the importance and use of social media sites have grown substantially among
modern enterprises, and they use it for performing various business practices such as
collection of data, marketing, market research, others. Starbucks has successfully
implemented an effective social media strategy based on which the corporation interact and
communicate with its customers to increase its fan base. Based on effective use of social
media sites, Starbucks has generated a competitive advantage in the industry which assists in
increasing its profitability. While using social networks, corporations receive a number of
advantages such as effective marketing tool, market insight, communication channel, global
reach and others. Along with benefits, there are many disadvantages of the use of social
media sites such as vulnerability to cyber-attacks, insider threat, negative publicity, and
requirement of a clear strategy. However, the use of social media sites in the organisation will
continue to grow despite its challenges. Therefore, corporations should develop strategies
which address issues relating to social media sites and increase their effectiveness. Starbucks
has implemented an effective social media strategy which generates a competitive advantage
of the firm and increases its profitability. Similarly, corporations should take precautionary
steps for improving cybersecurity and reducing insider threats. The companies should also
develop a clear strategy which will assist them in effectively using social media sites which
result in increasing their profitability and sustaining their future growth.

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