Global Strategy Analysis and Practice of Facebook
Facebook is a social network founded in 2004. It is now one of the most popular social networks, and one the most visited websites in the world (not counting the Google search engine). The company originates February 4, 2004, when Harvard student Mark Zuckerberg and several of his comrades created a website «thefacebook.com» (since 2005 renamed as the usual «Facebook.com»). Initially, the “Facebook” was only available to students at Harvard University. A little later, students of any educational establishment in Boston, and later, the United States, got the access to the site. Since 2006, the opportunity to join in the social network has anyone older than 13 years, regardless of the place of living. At this point, the number of registered Facebook users is more than 1.3 billion worldwide (Lee 2014).
The Analysis of the External and Internal Environment of the Company
External Analysis: PESTLE Analysis
Facebook is an international social network, a transnational corporation. Therefore, the generalized external review cannot see the features of countries that are involved in specific work in each state (Kirkpatrick 2011). That means that during the PESTLE analysis political, economic, socio-cultural and technical issues will be discussed.
A wide variety of political demands in various countries can reduce the number of Facebook users through censorship. These demands concern information systems, government regulations (China, Korea, Russia etc.) or other issues. The need to make some political influence on the citizens of forces of opposition and those in power (Egypt, for example) and constant political activity in one country can also restrict access to social activity. Legislation process may also slow the development of the social network and its implementation in everyday practice (Milne 2014).
Many economic characteristics in different countries allow local competitors to experience a privileged position at the expense of a deeper acquaintance with these features. The presence of the unstable and the unfavourable economic situation in such countries as Dominican Republic, Egypt, India, and more can reduce the cost-effectiveness of the network. Different levels of welfare in different countries, the different purchasing power affects the financial indicators of Facebook (Marshall, Krance & Meloche 2014). Another important issue is the exchange rates together with their ratios. They can produce a competitive advantage to competitors within a country or more informed multinational competitors.
Different costs for energy and communications in different countries are complicating the work. They also pave the way for the emergence of substitute products.
Transnational economic cooperation, as well as the development of e-commerce and IT-industry contribute to a more successful financial turnover for the benefit of the company (Harvell 2012).
The desire of users for communication is formed by the abundance of dialects, and language groups, together with the diversity of cultures, religions and everyday practices. Many of Facebook users use the site to talk to representatives of their country, which has the advantage of in-country competitors (Overstreet 2011).
Different levels of computer literacy in some countries do not develop a network. However, the desire to interact for people support is pursuing the management of Facebook to launch projects, in order to raise the level of the computer education all over the globe.
Unequal conditions for access to the Internet and the development of this direction in different countries complicate the prediction of network development and indirect evidence. The increase in the number of Facebook users in the future will come from countries, where Internet access is now unsatisfactory (Vander Veer 2011).
Different levels of development of national lines in some countries allow using Facebook as a mean of constant communication. However, in some countries, it is more like a luxury way of communication (Ray 2013).
The external environment for the further development of Facebook is big and satisfactory. That means that during future decades, the site will be facing only increasing number of users.
Internal Environment of Facebook Company
The offices of Facebook are now located not only in the United States, but also in many other developed countries of the world. The amount of users is growing every month, so there is the need in skilled managers who will provide the satisfactory level of cooperation. The internal environment is also very important and is facing the range of key competencies.
Facebook has more than 1.3 billion of registered members, half of which goes to the site daily. These users are active; in total, they spend on the site 990 billion minutes per month. On average, each of the users has 130 friends and creates about 90 pieces of content: links, news, photo albums, etc. The set of applications daily is now more than 50 million posts a day (Wadwha 2014).
The ability to encourage staff and independent application developers, as well as the ability to manage them is one of the key competencies of Facebook. Today more than 1 million of different applications are cooperating with the site. It is possible to register on different sites, leave comments, send mail, share files, and play online games with the help of personalized account.
Another important issue is the professionalism and dynamic work of the team. Moreover, the team is divided into core - the people working in the company - and, relatively speaking, freelancers, creating a variety of applications for Facebook (Ray 2013). High brand recognition due to the number of users, the number of developers, quality and convenience applications are making Facebook one of the most visited sites via Internet of today.
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The financial stable rate of the company is also a key value for the internal strong position. There is a large scope of investors, who donate money into Facebook development. For example, Goldman Sacks invested $450 million into Facebook. Moreover, many companies are integrating with the site, such as Twitter, MySpace and others (Mezrich 2011).
The management of the company made it possible to achieve high rates of income growth and value of the company: 177% revenue growth, a fivefold increase in capitalization in 2009 (Yahoo Finance 2014).
The SWOT analysis has shown strong and weak points of the company. The strong ones are the biggest amount of fans and users, their high activity on the site. In addition, it is good, that the company still has the place for further development. The better educated personnel are one of other strong sides of Facebook. In financial scale, the firm has also positive changes, the IPO of it was one of the most successful in 2012 and the value of shares is constantly growing. Facebook has the second place after Google in video traffic on the internet. Facebook is always open for cooperation that means it is supporting different startups and talented individuals. It is also one of the most attractive employers in the world.
However, Facebook still has some weak points. The first one is that it is the virtual resource and is fully dependant on the Internet. Moreover, different countries have strict regulation of information flaws, which means that the citizens of such countries have no possibility to use the network. That is another weak point of the company. Everyone knows Mark Zuckerberg, so the company has the strongest connection with the founder. That is not very good. The rapid changes in the value of the company can also be named as a negative issue within the scope of Facebook work.
The main features of Facebook are to establish and maintain a permanent presence of extended network users. Average presence on the site is about an hour a day, but this figure can be increased.
A breakthrough in the activities of competitors and, as a result, the emergence of substitute products reduces the risk of a number of users and their activity. Negative impact on partners and investors in the financial, intellectual and technological activity can become a negative feature for the development of the network (Lee 2014).
Internet hacking and piracy is also a foe of the company’s stable development. There is another negative factor, such as a growing number of user’s claims and potential political influence on the company. Every information resource has the problems with the security and liability of data, and Facebook allows sharing practically everything the member of the site wants. That is why the company is facing problems in the legislative field. The rapid development of the Internet can also negatively affect the evolution of Facebook (Woollacott 2014). Last but not least weak point of the company is the possibility of cultural mismatch. It is necessary to take into account the specifics of every culture. However, it is very hard, which means that the company’s management has much more work to do.
The Selection of the Main Strategic Options for Growth
In light of the external analysis results, Facebook must use its main competitive advantage - the audience, and strengthen the financial position in order to do less vulnerable assessment in virtual product. Number of virtual products must be increased by 5%. Because of the lack of information about the internal structure of the company, processes, costs and so on, it can only be assumed that it must be 5%, however this is a sufficient proportion to save the company in the event of crises described in threats SWOT. This proportion was elected based on the fact that the main capital of the company virtual assets is regular and independent personnel. In fact, Facebook has more than 1.3 billion audience. People around the world can offer almost any product, it is worth to focus on the relevant audience and main advantages of Facebook. Therefore, it will be possible to reduce costs and simplify the promotion of integration into everyday practice. Information products and a growing market are an optimal combination of financial consolidation of Facebook.
Facebook spent a record IPO in the history of the technology industry: one share valued at $ 38, and the whole company at $104 billion. Total sold shares at $16 billion (Yahoo Finance 2014).
The historical minimum value of Facebook shares as $17 was reached in September 2012 year. The organizers of the IPO and the Nasdaq stock had exchanged fell lawsuits against Facebook in which investors accused them of concealing information about the future prospects of the social network (Yahoo Finance 2014).
During the last year, Facebook spent much money in order to increase its presence in the market of mobile technologies. The company’s share price rose slightly and at the moment, it is about $26, which is higher than the minimum value, but below the offering price (Yahoo Finance 2014).
The main problems of Facebook now are a lack of diversification of service and weak advertising platform. Not just advertisers say that advertising on Facebook is ineffective. The General Motors Company made this statement, in particular. Even before the IPO, many experts called non-diversified Facebook product as one that has not proved the success of its business model. A third problem of the social network is the lack of a coherent mobile strategy and projects designed for mobile users. The sellers had to lower its price, so it was sold out only as a result of marketing and low price.
Financial results for the first quarter of 2013 were higher than analysts’ forecasts, but only slightly. Experts believe that the basic steps for Facebook in the mobile market are still ahead. This proves, for example, the fact that in the first quarter of 2013, about 40% of Facebook’s advertising revenue was generated in the mobile sphere.
According to the company’s top managers, the social network now focuses on products that would have allowed it to increase the amount of time spent by users on the site.
Your Strategic Solutions for the Company’s Ongoing Health
There is the offer to sell the device for reading electronic books (e-readers) with access to the Internet that will have Facebook brand. It is possible to establish partnerships with companies that are already present in the market of devices for reading, for example, The Sony Company. The product can have the name of Facebook-reader. This partnership is optimal, since Facebook gets ready distribution system, and partner - access to an audience of potential customers. Developing a personal product for Facebook is now expensive and not appropriate. In order to make partnership with producer equal and comparable, it is necessary to offer some additional value unit to buyers. For example, it can be the creation of two applications of a kind. The first will allow one to convert any formats of digital works on the reader to read from Facebook, and the second will help to interact with the network and to post favourite parts of the book using the e-reader.
Facebook is an interesting field for research and further development. The future of the world is now in the flows of information, and the one who will catch it will face prosperity, wisdom and long life in the business sphere. Facebook is still a young company, but it had already shown success. If the company pays more attention to its strong points and fights the weak ones, it will have stable growth within the following decade.