International Strategic Management
Facebook Inc. is a social networking platform that was established in 2004 by three Harvard undergraduates, Mark Zuckerberg and two of his roommates in their dorm room. The company allows users of the platform to share their opinions, ideas, activities and pictures. The primary operations of Facebook are in the United States but it has a global presence. The headquarters of the organization is at Melno Park, California. It is reported that the company had 4,619 employees and estimated revenue of about $5,089 million.
This paper is aimed at analyzing the business strategies of Facebook, especially the company’s mission and vision statements and the possible strategic objectives that the top management will pursue over the period ranging from 2014 to 2016. Besides, it will also identify the organization’s main competitive advantages and their sustainability.
Vision and Mission
The mission statement of Facebook is focused on empowering users by offering them the technology that they can use to connect with other people. The social platform provides tools through its website. Every individual user is required to create his or her Facebook experience. The company has enhanced openness and connection, and its website is almost synonymous with social media. Its vision statement on the other hand, captures the intentions of the website’s founders. It highlights three main reasons why people use Facebook, which are posting updates concerning them, expressing what matters to them, while connecting with their friends and families through reading the updates. Facebook today also offers connections with companies and various organizations, thereby enabling users to discover what is going on around the world by liking the pages of the companies and other news pages.
The two statements have been greatly effective in the communication of the purpose of the organization. Its mission statement takes a modest approach, showing that all the company can do is provision and maintenance of a service. The vision statement is also an indication that Facebook has the ability of offering more than just a website.
Suggested Strategic Objectives for Top Management 2014- 2016
The first objective of the company is to raise the number of people using Facebook through their mobile devices. Today, more than 600 million people use Facebook through mobile devices. However, although this group accounts for an estimated 60% of the entire user population of the social platform, mobile advertising only accounts for 14% of the total revenues of Facebook. The company needs to create a platform for displaying advertisements to mobile users (Geron, T. 2013, P.1).
Secondly, Facebook aims at the diversification of its sources of revenue. The organization relies heavily on ads on its social networking platform as the main source of revenue. However, considering that it is the second largest website globally with more than one billion active users per month, Facebook should turn to exploiting other online opportunities in order to grow their revenue base.
The third objective of Facebook is opening a marketplace ‘Facebook Marketplace.’ With the more than one billion users and global presence of Facebook, it is well positioned to open its own marketplace. This strategy will help in generating more revenues to the company unlike advertising, and thereby boost its growth and future prospects (Piskorski, M, Eisenmann, T, Chen, D and Feinstein, B. 2011, P.5).
Analysis of the Main Competitive Advantages
The extensive presence of Facebook has enhanced its appeal to the company’s major client group of advertising agencies across the globe. By March 2013, Facebook had acquired an estimated 1.11 billion active users per month compared to a staggering one million users in 2004. This is a significant improvement of approximately 1.10 billion new users in a record nine years. By December 2004, the users of Facebook were all college students in America. Today, it is available to users in almost all countries with an estimated 70 languages. According to the industry estimates of September 2012, a single Facebook user spends averagely six hours forty minutes on the site. This indicates almost three times the time that they spend on other competing websites like YouTube, Google and Yahoo. Besides, the industry estimates equally show that Facebook users account for an estimated 51% of the global internet population unlike YouTube and Google Plus which account for only 21% and 25% respectively. Twitter is also on the other hand used by 21% of the world’s internet population. This statistics show the fact that Facebook commands unrivaled reach and also tops the social network market.
Based on the sustainability of this competitive advantage, the global reach of Facebook is sustainable because of the high switching costs resulting from the fact that the users have well established networks, applications, and content within the organization. These are assets that are considered to be of great importance to many Facebook users and they are not willing to quit. The global reach of the organization is a competitive advantage that cannot be replicated, which can be leveraged by the company in order to enhance its appeal to advertising organizations (Piskorski, M, Eisenmann, T, Chen, D and Feinstein, B, 2011, P.6).
Facebook’s Strong Market Position offers it a Favorable Competitive Environment
The organization enjoys a strong position in the social networking industry where its activities are placed unlike other social networking sites. Facebook has the strongest market share with regards to the number of visits. Available industry estimates show that by March 2013, Facebook had registered 57.1% of the total share of visits. Its closest competitor, YouTube came at position two with an estimated 24.7% share of visits, while Twitter came third with 1.6% share. In the beginning, Myspace,Twitter and Google were far much ahead of Facebook. However, the company had been able to successfully overtake many of these competitors by 2011 (Piskorski et al, 2011, p 13). Besides, it has also phased out rival networks like Bebo in the United Kingdom and Friendster (Hempel, J. 2013, P. 72).
With the United States, the company enjoys a leading position in the social networking market with an estimated 83% share of the total time that people spend on social media. Other social networking platforms like Tumblr have 5.7% share, followed by Pinterest at position three with 1.9% share, Twitter with 1.7% and LinkedIn with 1.4%. The high number of visits acquired by Facebook explains the popularity of the company’s products. This is a significant competitive advantage considering that its competition has not yet created a product with such impeccable success rates. Besides, the company has been able to successfully leverage its strong market position to increase the market share in advertising, and created a brand in this segment of the market. These successes have enabled Facebook to acquire unmatched competitive advantage and illustrate the high appeal that is enjoyed by its products among advertisers and other users.
With regards to sustainability, the great performance of Facebook is advertising is highly unlikely to be replicated by competitors in the times to come. First, the company has been able to significantly enhance its advertising products, which ensured that it delivers more performing news feed inventory. Besides, it has well structured audience-targeting capabilities, with larger and more appealing image formats. As a result of these improvements, the marketers have and will always be able to reach out to potential customers in the most effective way with messages that are relevant and impactful across all stages of the customer journey.
Secondly, users of Facebook have also been able to consistently express their willingness to engage with product and brand advertising across various devices. What’s more, unlike any other social platforms, advertisers have acquired significant experience with Facebook advertising and are launching complex and highly efficient strategies to advance their direct response objectives. Besides, brands continue to enhance their core products, customize their advertisements on Facebook (Herrold, T. 2013, P.1). These are expensive investments, and these organizations are unlikely to move to other platforms in the future since Facebook adverts continue to generate more sales, additional revenues, and higher return on investment for these brands.
A Profitable Database that Provides Value to Developers and Advertisers
Facebook has a quite lucrative database that enables it to acquire huge volumes of information on users, their internet activities, and social connections. Such kind of information is of great value to developers and advertisers. The data that is owned and regulated by Facebook provides substantial competitive advantages. In the same way, the high value that has been placed by Facebook on third party developers and their users has also further enhanced its appeal, especially among content and application developers. For example, Android and Apple developers can connect applications to Facebook platform. Out of the top 100 IOS applications developed by Apple, 89 have connections with Facebook (Bercovici, J. 2013 P. 17). The platform of Facebook equally provides numerous unique features that are beneficial to third party users, which have been of great value.
This value has in turn resulted into a virtuous circle between the company and its partners. Another compelling and unique feature is the authentic identity of Facebook which is an integral component of a social networking site. The partners of Facebook are able to use their credentials through Facebook Connect instead of demanding that users create new ID and password (Piskorski, M, Eisenmann, T, Chen, D. and Feinstein, B. 2011, P.8). This function ensures easy sharing of data between organizations, which further enhances better personalization, social functionality and advertisement targeting (Vance, A. 2013, P. 43). According to Facebook, the site converts casual users into Facebook registered users twice as often following the introduction of Facebook Connect login functionality. The rich data set that the company offers coupled with its lucrative value is a strong competitive advantage.
Based on sustainability, the company will continue to benefit from this competitive advantage since it is difficult for competitors to replicate considering the first mover advantage that is enjoyed by Facebook. Besides, the close working relationship with developers makes it challenging for them to switch given their applications is designed for the Facebook platform, while others linked to Facebook.
In conclusion, despite the significant threats that the organization experienced from its inception, its strategic and consistent innovation combined with its Hacker Way of development has enabled it to create various sustainable competitive advantages that continually drive the growth of the organization. Facebook produces various differentiated offerings that are considered to be of great value.
Bercovici, J., 2013. ‘Is Facebook Home Facebook’s Answer to Facebook Fatigue?’, Forbes.Com, p. 17, Health Business Elite, EBSCOhost, viewed 10 November 2013.
Geron, T., 2013. ‘Facebook Needs Traffic’, Forbes, 191, 8, p. 1, Health Business Elite, EBSCOhost, viewed 10 November 2013.
Hempel, J., 2013. ‘the Second Coming of Facebook’, Fortune, 167, 6, p. 72, Health Business Elite, EBSCOhost, viewed 10 November 2013.
Herrold, T., 2013. Kenshoo Social Study: Quarterly Analysis of Facebook Advertising Performance Shows Strong Improvements Across Key Performance Indicator, viewed 10 Nov 2013<http://kenshoosocial.com/blog/quarterly-facebook-advertising-performance-q3-vs-q2-2013/>
Piskorski, M., Eisenmann, T., Chen, D. and Feinstein, B., 2011. Facebook’s platforms. Boston, Massachusetts: Harvard Business School.
Vance, A., 2013. ‘Your Facebook Data Are Here’, Bloomberg Businessweek, 4349, pp. 42-44, Health Business Elite, EBSCOhost, viewed 10 November 2013.