Analyzing Social Networks in Business: Advantages and Disadvantages

This report provides a comprehensive analysis of the advantages and disadvantages of utilizing social networks in business. It begins by outlining the increasing importance of social media platforms like Facebook, Twitter, and LinkedIn for establishing customer relationships and enhancing business visibility. The report reviews existing literature on the topic, examining theories such as social network theory, word-of-mouth theory, and social exchange theory to understand the dynamics of online interactions. It highlights benefits such as enhanced brand image, access to customer data, cost-effective marketing, and increased customer retention. Conversely, the report also addresses drawbacks including the need for significant technological investment, time-consuming engagement, potential privacy risks, and the possibility of negative employee posts impacting organizational image. The report concludes by identifying gaps in the existing literature, particularly concerning the detailed understanding of the disadvantages of social networks in specific business contexts, suggesting areas for further research.

BUSINESS RESEARCH METHODOLOGY
(ADVANTAGES AND DISADVANTAGES OF USING SOCIAL
NETWORKS IN BUSINESS)
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Table of Contents
1. Introduction..................................................................................................................................3
2. Project objective..........................................................................................................................3
3. Project scope................................................................................................................................3
4. Literature review..........................................................................................................................4
5. Conclusion.................................................................................................................................10
Appendix........................................................................................................................................14
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1. Introduction
Using social networks is considered as the most advanced and effective mode of marketing. It
helps a business to grow significantly at a minimal cost. Therefore, business firms have become
inclined toward developing their presence in social networks like Facebook, Twitter, LinkedIn
and much more for establishing a strong relationship with their existing and potential customers
(Trainor et al. 2014).
Therefore, to understand the advantages and disadvantages of social networks in business, a
number of literature on the pros and cons of social networks are analysed in this assignment. The
critical analysis of the use of social networks in business would help to gain a better
understanding of the research topic.
2. Project objective
The main objectives of the research are:
 To understand the use of social networks in business
 To identify the advantages of social networks in business
 To identify the disadvantages of social network in business
 To provide some recommendations to improve the use social networks in business
3. Project scope
At the present day, most of the companies are likely to use social networks to make their
customer base stronger by tracking their buying behavior and changing preferences through their
online activities. Social networks provide a wide opportunity to the businesses to enhance their
visibility among customers and promote their products successfully (Fan & Gordon 2014).
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However, before using social networks, it is also important to consider its drawbacks (for
example, it requires huge time to use social media for navigating and organising the intricacies of
every medium) so that effective strategies for using social networks can be developed (Hinz,
Schulze & Takac 2014). It proves that there is a huge scope of the present study in the future, as
it may solve the problems of so many companies, which use social networks in their businesses.
4. Literature review
Use of social networks in business
Social networks refer to the way of being connected with friends, families, customers and
business partners through the internet using social media programs. Initially social networks
were used for social purposes (Zaglia 2013). However, with time, marketers explored the use of
social media in businesses by opening a business page on social media platforms like Facebook,
Twitter and much more. Brand communities entrenched in social networks. Brand communities
show highly significant marketing, CRM (customer relationship management) tools and
innovation management. However, implementing fruitful marketing strategies currentlyand in
the coming future indicates the discovering and grasping the exceptional opportunities of social
networks (Business.vic.gov.au. 2017).
Social media has replaced the conventional mode of marketing significantly. Even today, this is a
common argument in business organisations, specifically in traditional industrial firms, that
social network is only beneficial for the business-to-customer sector. In terms of business-to-
business companies, social media is not as helpful as business-to-consumer companies are
(Jussila, Kärkkäinen & Aramo-Immonen 2014).
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Businesses have turned to social media platforms to link with customers in a positive way. It is
changing the way of communication significantly. The key to the success of social media
marketing is not becoming obsessed with the technology and tools, but concentrating on the way
of using them more meritoriously to enhance the visibility of the personal brand (Aral,
Dellarocas & Godes 2013).
Theories related to social networks
The social network theory considers social relationships as ties and nodes. Nodes refer to the
people within the network and ties refer to the relationship between them. Thus, the social
network can be used for defining the social capital of an individual (Holme 2015). Social
network theory describes the way in which companies interact with their business partners,
competitors, employees, and customers. There are a number of informal connections, which
connect the executives of different companies together. Moreover, it also connects the employees
of different companies and thus, offers a way of accumulating information about other
companies and gauges the competition level. Based on the gathered information, companies can
develop new policies and strategies accordingly (James & Prout 2015).
In social networks, people often share weak tie information. In the Facebook, information is
novel and diverse. A company can access the weak tie of a follower to circulate information for
attracting more followers and more ‘likes’. Therefore, all the big companies like Samsung,
McDonald's, Microsoft, Nike and so on using social networks in their business for analysing
competition level and making a strong connection with the customers (Liu et al. 2017).
Word of Mouth or Psychological Ownership Theory explains the reason for the motivation of
the earlier customers to provide WOM feedback. Some customers cultivate feelings of relation
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with the companies they are loyal. Therefore, they use the words like ‘my', ‘our' ‘mine' and
others while giving their feedbacks. They psychologically perceive the company as theory own
company and tend to give a positive WOM to other people and negative feedback to the
management of the company. For example, in the tourism industry, the travelers, who are
satisfied, post positive review about the company on the travel blogs that attract other customers
to the company (Jussila et al. 2015).
The desire of customers to determine through this kind of communication may lead to intrinsic
pleasure, feeling of usefulness and extrinsic satisfaction in offering suggestions to others through
social media. Thus, a company can influence on social media and customer feedback for
obtaining strategic benefit (Kirk, Swain & Gaskin 2015).
The social exchange theory stipulates that all the social networks are dependent on the contents
shared by its users. Customers share their views and experience about a company over social
networks for making other people informed. Positive feedbacks of the customers spread positive
brand image, whereas, negative feedback of the customers spread negative brand image. Some
people share videos and audios on YouTube to share their experience that help other people to
take their purchase-decision (Slack, Corlett & Morris 2015).
However, the theory is not attentive tie the problems of cross-cultural variations and cultural
context in the rules and customs that determine social exchange. This is merely based on the
concept of reward (Northouse 2015).
Advantages of social networks in business
Social networks provide significant opportunities to a company to enhance its brand image
among the current and future customers. Social media helps to collect a wide range of data about
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the customers. There are more than 4.5 million likes on Facebook, 500 million tweets and 95
million videos and photos are uploaded in Instagram. These confounding numbers are the source
of information about the buying behaviors, choices, and beliefs of the customers. It helps firms to
make the shrewder business decision. This is how Samsung, Nike etc. gather information about
their customer preferences. In the same way, a company can acquire more customers through
social media than any other marketing method. This is because above half of the total population
of the world are present in social networks (Vukasovic 2013). (The number of social media users
in Australia refers to appendix)
When a company has a presence on social networks, it makes it easier to its customers to find
and be connected with the company. This is an effective way of enhancing brand loyalty and
customer retention. Apart from that, social ads are a cost-effective way of promoting a business
and disseminate content. They also provide strong targeting options to a firm to reach to the right
audience (Laroche, Habibi & Richard 2013). For example, EasyJet can target its customers based
on their demographics, locations, behaviors, connections, and interest through Facebook.
Moreover, the firm can monitor and analyse its performance of public commercials in real time.
Social networks enhance the customer retention and sales through maintaining a regular
interaction and providing timely services to the customers. Social media is the most helpful way
to recognising major decision makers and novel business opportunities. It plays an important role
in making leads and thereafter, increasing sales. A survey carried out by Socialmediatoday
discovered that 71% users of social media tend to shop products from companies those are
connected with social media. Social networks generate almost double marketing leads as
compared to any other mode of marketing (Ciprian 2015). Advertising on social networks not
only provide information regarding a product but also promote innovation. It provides the
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opportunity to the small businesses to compete with larger organisations in the international
business environment. This requires a very little investment to create a presence on social media.
Therefore, not only big companies but also the small companies can take the advantage of social
media in their business (Abuhashesh 2014).
Disadvantages of social networks in business
There are a number of notable issues related to the integration of different social media
techniques. The organisations can make the error of designing an unstructured tactic and not
evolving strategic techniques. The diversified nature of the social networks often makes
marketers confused about the impact of every social media tool. If the marketers fail to
understand that various social media cater to a diverse sort consumer market, then they would
not be able to use the social networks properly in their business (Abuhashesh 2014). It needs a
significant investment to develop the technological infrastructure of a firm for carrying out the
social media marketing effectively. A small-scale company has to take decision wisely in terms
of investment for incorporating social media into their business, as it determines the profit rate
and long-term success of the firm. If the firm invests too much in developing the technological
infrastructure, then it may face the challenge if the technology becomes outdated. Furthermore, it
needs huge time to develop and maintain a regular and effective communication with the current
and prospective customers to keep them connected with the company and gain their loyalty
(Laroche, Habibi & Richard 2013).
In order to obtain the expected brand outcome, a company needs to select appropriate brand
community category, cultivating interaction with the customers and staying regulated with the
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social engagement. Sometimes, this becomes difficult for the marketers due to lack of time
(Zaglia 2013). In the healthcare organisations, although, social media has brought a significant
number of benefits, however, it has increased the privacy risk of the service users, if the
confidentiality is not managed properly. If the information exchange through the social network
is not monitored properly for maintaining reliability and quality of the information, then it can
affect the decision-making negatively (Moorhead et al. 2013).
Using social networks, employees can send negative posts or annoy one another and deter the
attitude of working together. An employee, who experienced a bad day within the workplace can
post his status or tweet and if the message is transmitted to the supervisor by another employee,
then it may create antipathy among employees and tension within the office. Besides, the
employees can reveal the business information and promotions that the company may not intend
to publish. Moreover, in the same way, employees can share confidential information of the
company to the competitors or information can be sent to the wrong person accidentally. It may
have a negative impact on the organisational image (Zikmund et al. 2013).
Gaps inliterature
A number of books and journals are critically evaluated for identifying the advantages and
disadvantages of social networks in business. This has helped in gaining in-depth knowledge
regarding the different advantages of social networks and their uses in business and the way they
help the present day business organisations to gain competitive advantages. However, the
disadvantages of social networks in business could not be identified and understood
appropriately that created the gap in the literature. Although the literature is analysed for
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identifying the weaknesses of social networks terms of business, however, detailed information
cannot be gathered and hence, the area needs further consideration.
5. Conclusion
From the above analysis; it is clear that social networks are a boon to the marketers by means of
promoting their business and strengthening competitive position within the marketplace. It
provides a wide number of opportunities to the companies if used properly. It is a very cost-
effective way of developing an effective relationship with customers, selecting a target market
and promoting products and services. However, some of the disadvantages are there too, which
must be handled properly for utilising the gift of technological advancement efficiently.
Marketers need to select the proper social media tool and appropriate content should be
promoted through it for attracting a large number of consumers. Appropriate technological
infrastructure must be there for handling information sharing in a proper way and avoiding
ethical and legal issues.
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6. Works Cited
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Business and Social Science, vol 5, no. 8, pp. 96-185.
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contest/>.
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August 2017, <http://www.business.vic.gov.au/marketing-sales-and-online/online-business-and-
technology/social-media-for-business/using-social-media-to-boost-business>.
Ciprian, P 2015, 'THE GROWING IMPORTANCE OF SOCIAL MEDIA IN BUSINESS
MARKETING', Quaestus, vol 12, no. 7, p. 94.
Fan, W & Gordon, MD 2014, 'The power of social media analytics', Communications of the
ACM, vol 57, no. 6, pp. 74-81.
Hinz, O, Schulze, C & Takac, C 2014, 'New product adoption in social networks: Why direction
matters', Journal of Business Research, vol 67, no. 1, pp. 2836-2844.
Holme, P 2015, 'Modern temporal network theory: a colloquium', The European Physical
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Northouse, PG 2015, Leadership: Theory and practice, Sage publications, california.
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Appendix
Figure 1: Social media users in Australia
(Source: (Bluefishbusinesssupport.com.au 2017)
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