The business strategy of Facebook in changing external and competitive environments
Facebook has grown tremendously in the last few years. Facebook started as a small website for students to share photos. However, the company is now one of the largest social media network with over one billion users. This growth can be attributed to the strategic decisions that Mark Zuckerberg made as the company’s CEO. The company also enjoyed huge revenue in 2011. The company had revenue of $3.71 billion up from $1.97 in 2010 (Albanesius, 2012).
Despite all this, the company may well be nearing the end of its product life cycle. There are four different developmental stages in a product’s lifestyle. In the introductory stage, which is the first one, growth is stagnant, and profits are minimal as the product is on trial. The product, if successful, proceeds to the growth stage. In this stage, the product expands into new markets because the product has been accepted.
The third stage is the maturity cycle where Facebook currently is. In this stage, there are stable prices and profits. It has become the norm for everyone to have an account on Facebook, which means growth stage has been passed. The last stage is usually the decline stage where sales and profits decrease. Although there is yet to be developed a technology that will directly kick Facebook out of business, several factors threaten the company’s stability. (Matt, [email protected], & USA, n.d.).
There has been a big exit from Facebook especially in the U.S, Canada, and European markets. The company also introduced its IPO in May. The Facebook shares have performed dismally going below by as much as 40% since. Another factor is the rise in the use of Twitter. Although the micro blogging site uses a different technology, it could very well compete with Facebook for advertisements. As such, to keep stable in this industry, Facebook must adopt an appropriate business strategy (Champoux, Durgee & McGlynn 2012).
At its start, Facebook’s strategy was aimed at getting as many users as possible, especially in the U.S and Canada. The company embarked on a charm offensive and managed to lure as many campus students as there were. This strategy was implemented by enhancing direct collaboration with colleges. Previously, college administrators had a negative opinion about Facebook and saw it as a nuisance. The company set a target to market itself to college administrators (Sarachan, & Reinson 2011).
The company would provide organizational services, which included class registration, promotion of clubs and activities. With the cooperation and support from the colleges, the company was able to bring in new users, for instance, by advising freshmen to check the school Facebook groups (Helvie-Mason 2011).
Students will thus be compelled to open accounts. The company will then offer many services to keep these customers dedicated to the website. Another strategy involved balancing the entry of new users with advertisement.
College students provide a strategic advertisement market for other colleges, books, and even music. This often involved sending messages to a user and informing them of their friends who have, say, downloaded music at a certain music website. Given the peer pressure effect, most users would follow suit thus providing the company with click-through rates (Haigh, Brubaker, & Whiteside, 2013).
With the change in client numbers, the company has reviewed these strategies as they are outdated. The user numbers have nearly hit the limit since there can only be so many users in the world. The company now has set new strategies to keep up with the changes in the industry. Facebook plans to expand to global users.
It is important to note that, although the company is immensely popular in the U.S and Canada, there exist huge market gaps in countries such Japan, Germany, Brazil, Russia, South Korea and many African countries. Facebook has been unable to enter the Chinese market, which is heavily dominated by heavy players among them the SINA Corporation and RenREN (McAndrew & Jeong, 2012).
The company is also considering developing social products so as to maximize engagement. Through innovation, the company hopes to enhance communal engagement by providing interactive solutions. However, experience has shown that customers are often dissatisfied and angry with compulsory upgrades.
A move to include users into more interactive communities should be carried out with utmost care to develop a more engaging technology for the mobile user. The mobile market is often said to be most factor in the company’s growth. The fact that the company will often be required to expand into this market portends an uncertain future. The screen is smaller thus limiting the level of graphics that can fit (Mauri, Cipresso, Balgera, Villamira & Riva, 2011).
The market has also begun getting many entrants who could inconvenience the company. Given the money that the company has recently acquired through the IPO, the company intends to buy some of the companies that currently have a substantial stake in the mobile technology industry. However, the biggest threat will be from Google.
In this case, Google may emerge to hold a major stake in the industry through its Google+ social network (Richmond, Rochefort, & Hitch 2011). The company also plans to boost efforts to become the leading developer of Facebook apps. If the company can invite developers to make its apps, users will most likely adopt them more easily than they will with respect to apps from other developers. However, this market will be difficult to win given that most users may ignore these suggestions.
Another strategy is for the company to increase products for both users and advertisers. Given the fact that the company has a very huge market by virtue of the high number of users- users who are not charged anything, companies may take advantage by posting adverts through Facebook. Such a move should be done subtly to avoid hindering the customer’s experience (Shiri, 2009).
From the discussion, it is clear that Facebook started with clear strategies that have worked well to give it the success it currently enjoys. However, with the change in the market environment, the company needs and continues to adapt new strategies. Each strategy has its merits and demerits as discussed in the paper.
The implications of Facebook’s aggressive growth strategy to the organizational culture
All organizations have a culture. There are several organizational cultures one can use to analyze organizational culture. There exist four types of culture in organizations. They include the power culture, task culture, person culture, and the role culture. Some organizations retain power in the hands of only a few people who make decisions. They are privy to the privileges of the organization.
The same individuals delegate duties to the rest of the workforce. In this case, the subordinates have no choice but to comply with the given instructions. There is a likelihood of the managers to favor certain individual. This can lead to a rebellion by the rest of the workforce.
The second type of culture is the task culture. Here, the organization has teams or several groups formed to attain set goals or to solve certain problems. These small groups of about five people are normally comprised of individuals with common goals or specializations who will contribute equally to achieve set goals (Norton, 1994).
The person’s culture is the third type in Charles Handy’s model. In this model, individuals care more about their interests and not the company’s interest (Condon & Laberis, 1996). Employees see the organization as a means to get money and rarely feel attached to the organization and are always disloyal to the management and decision made is not in favor of the organization. There is no need to mention that such an organization performs dismally and is fast to collapse.
The role culture is the fourth culture in Charles Handy’s model. It involves each employee being delegated roles and duties that best suits the employee’s specialization, education, interest and expertise. Such a scenario allows employees to identify the roles and areas where they can perform best (McAndrew & Jeong, 2012). The employees should be ready to accept the challenges associated with the selected areas of work. This means that employees have the power and freedom that comes with responsibilities (Bailey, 2007).
With its growth, Facebook has changed some of its cultures and practices to be in tandem with the growth, as well as to maintain the corporate culture. When he started the company, Mark Zuckerberg set an open culture with no hierarchies. The founder sets several structures that were intended to make the company a fun place to work (Brandenburg, 2008).
Such an environment would attract the best talent in the industry. The company has since then grown from a small company to a global company with thousands of employees. It also has had to change its corporate structure and culture to give it a more corporate image (DUMENCO, 2012).
Charles Handy’s model provides an appropriate model to analyze the culture at Facebook. Facebook provides a combination of the role culture and task culture as discussed by Charles Handy. On role culture, the company provides a great experience for the worker, with an internal culture of openness and cooperation. Purkayasha and The company offered many opportunities for people who wanted to be innovative, as well as explorative.
This independence separates it from the pack. Employees are left uninterrupted by office politics, and meddlesome management. The company has no cubicles as employees share desks. Even the management share desks as did Mark Zuckerberg although they used the conferences for meetings. When the company shifted to California, they created a relaxed environment even providing a basketball court which had graffiti paintings. Management was readily available and easy to approach.
Employees were provided with good foods, including three meals a day and snacks at all times. Food was ranked as one of the most attractive perks. The company was copying Google’s style as it even hired one of Google’s chefs. The company also provided special meals during sessions that required the company’s programmers to work all night (Ferris, 2012).
On task culture, they have a culture based on small teams that work together developing innovative product. The company recruits based on the right attitude and not necessarily the best skills. The hiring practices at Facebook are skewed in favor of the cultural values set by the company. The company has very few vice presidents so that all employees feel equal.
At the start of 2008, the company the engineering team at Facebook started the engineering boot camp program. This was meant to instill its culture and values to recruits. Under this program, each recruit would go through an intensive six month program that involved working with a mentor and a cross team with hands on problem solving. The purpose of this learning from mentors and peers was geared towards establishing a task culture as it helped the learner to connect across in the organization.
As the company growth went on, there was a need to open new offices. By the year 2011, the company had over 20 offices across the globe. This was a tricky moment as the company needed to maintain the culture similar to the one at the headquarters (Haigh, Brubaker & Whiteside 2013).
In an effort to inculcate its culture in the new offices, the company would select some of the company’s top employees who were experienced in the running and culture of Facebook. They were then delegated to go open, set and establish the new offices for a certain period. These teams were referred to as the Landing teams (Vara & Delaney, 2007).
However, the company did not have it easy at all times. Some employees were unhappy with the long happy hours. Others complained the pay was not as good as it should have been. A plan to cancel a monthly stipend for employees living close to the company headquarters was met with a lot of hostility.
However, the company explained the plan was a measure to cut costs in the face of rising hardware costs. Overall, the company has been able to maintain a balance between its intense growth and preservation of the corporate culture. It is one of the best companied to work for in the world which has attracted the best talents and best results in terms of user satisfaction (Aydin, 2012).
Strategic recommendations to Facebook to enhance its future business success
Strategic planning is the process by which an organization plans to achieve its mission (Schraeder 2002). For Facebook to continue being the epitome of business success it has become, the company should adapt several strategies that will help it realize its goals. (Durvasula, Lysonski and Mehta, 2006) suggested some driving forces that could help evaluate the prospects of any sector in terms of competitive positioning.
The five Porter forces could be ideal in analyzing competitive forces in whichever industry, including the industry in which Facebook operates. The model strives to address key strategic issues in a general approach.
The forces discussed are degree of rivalry, buyer’s power, threat of substitutes, supplier’s power, and the threat of new entrants. Competition among rival firms has the risk of driving profits to zero. Competition, however, is not perfect (‘Competition on the line’ 2004).
In the social media industry, a large market share is held by the largest companies such as Google, Facebook, and Twitter (Curran, Morrison, & Mc Cauley 2012) The industry has a high concentration ratio. The industry is never quite as each firm strives to gain advantage over the other. Facebook can consider adopting several strategies to gain competitive advantage, which includes product differentiation, establishing good relations with users as well as the suppliers in the industry (Ramarapu & Lado 1995).
As Facebook has grown, the competition from Google has become intense (Dumenco 2011).The Google network has 90 million users. It is also has another 350 million users on Gmail not to mention the quarter billion users on Android devices. Most of the revenue Google gains are from advertisers just like Facebook. Unlike Facebook, Google has many products as mentioned here. This poses the threat of Facebook losing users to Google.
The threat of substitutes according to porter’s model refers to services from the other industry, or rather from outside the industry. Facebook is a social networking site whose purpose is to allow users to stay connected with friends. The emergence of new service application such as WhatsApp, Skype, and iMessage, will pose a threat. WhatsApp and iMessage are short messaging messages that are internet based (Poeter 2012).
There are other threats such as Video calling services which include Skype and Google Hangout. By allowing video communication via the mobile telephone and PCs, they can attract users from Facebook. To counter these challenges, Facebook should consider introducing more messaging apps as well as a partner with Skype to produce video calls for its users.
As companies face competition from peers, they also face another threat from new firms (Shewmake 2000). As profits rise, additional firms are bound to enter the market given that the market, in theory, is free-entry, free-exit. In the real world, however, there are barriers to entry and high profits are inhibited. The social networking industry has low entry barriers and appears as potentially profitable.
With a few servers and a number of programmers, one can produce a networking site (Pearson & O’Connell 2011). These inputs are readily available with a small investment. Mobile journal path poses a threat to Facebook. Two months in the industry, the site has gained nearly two million users. However, unlike Facebook that is available on several platforms, the mobile journal path is limited to smart phones.
The company should boost the Facebook platform app which allows developers to make apps for Facebook. Such developers are unlikely to think of introducing their own apps that can rival Facebook. The company should also adopt a strategy of buying some of the small companies attempting to break into the market.
The bargaining power of customers is the power that clients command in the buying process of services or products within an industry. When the buyer has strong power, such an industry is referred to as many suppliers- one buyer industry. Facebook does not exist in such an industry. Their customer is the advertiser. Revenue from advertising accounts for more than 90% of the total revenue.
Given the number of users that the company boasts of, customer bargain power is very low. Thus, the company has been able to increase the average ad price. However, if the company continues to lose users, the customer bargaining power will increase. The best strategy to mitigate this risk is for the company to create new innovative applications to create a better user experience.
As discussed, it would be prudent for the company to market itself in new markets to fill the gaps in a loss of users in the traditional markets. Suppliers bargaining power is the fifth factor that Porter discusses. All industries have their suppliers; there exists a buyer-supplier relationship in every industry Kim, Bojanic, & Warnick, 2009).
However, in the service center in which Facebook operates, there are no direct suppliers. While the company continues to enjoy the power over suppliers, there are several factors that threaten this power. The loss of customers in traditional markets, as well as the inability to reach new markets is one major threat.
The loss of users to other platforms by competitors like Google is another threat However, the old users cannot easily join other network high leverages the company’s supplier power. The supplier power is thus average.
The potential of Facebook to add value to a small non-profit social enterprise
Facebook allows organizations to create profiles and become active users and with nearly a billion users on Facebook. Organizations, both profit and non-profit, have adapted these strategies into their public relations campaigns. Profit organizations may choose to launch new products in order to boost sales. On the other hand, non-profit organizations have been slow to take advantage of this medium. (Waters, Burnett, Lamm, & Lucas 2009).
Undertook a study to determine how nonprofit organizations faired in the use of Facebook. They sampled a total of 275 random cases. They found out that, on the question of disclosure of information, most organizations listed the administrators on their Facebook profiles. Their study also found out that organizations that are nonprofit have not adapted Facebook applications.
The study had concluded that social networking sites were a new way of doing things. This was meant to make public relations experts review their approaches in how they conduct their campaigns. The organizations were found to be open in the disclosure of their Facebook profiles. However, the organizations failed to use the Facebook platforms to inform and engage the public of their activities. Unlike other social networks like Twitter, Muralidharan, Rasmussen, Patterson, & Shin 2011).
Noted that Facebook provides the best platform to tell a story. Most non-profit organizations often need to tell stories. This provides a platform for followers to share stories, photos, and experiences. To be successful in the use of social media, one must have an understanding of the platform and the technology behind social media. In this era of freedom and choice, noted that people want you to communicate to them from where they are.
Most people are clearly on Facebook. Although some people are on email, they do not like spam and emails targeted for a mass audience. On the other hand, Facebook is ideal in communicating with mass audiences (Napoli 2010)
An organization that limits its channels to the traditional media will lose out. Using many channels such as Facebook can increase the awareness of one’s company. (Sun & Wu 2012)noted the benefits that accrue to a nonprofit organization using social media. It is an opportunity to learn what your supporters are saying about the organization. It is a means to get traffic to your website, it may also help traffic into your donation pages.
Social media helps in optimizing your organization on search engines through key word content. The social media platform provides an avenue for the most ardent supporters to promote the organization to their colleagues. It also provides an opportunity to create networks in the grassroots and even react to happenings that otherwise would have been unforeseen. Interacting on social media also intimates the organization to the public. This will further build trust and loyalty from supporters.
Before an organization can start using Facebook, several factors should be considered. In this case, one should ensure that the persons hired to manage the organization’s profile are trained and are familiar with the use of Facebook. It is also important to consult the organization’s stakeholders and then follow opinion shapers to understand the trends in the industry.
The organization should then identify areas where to focus. Some of the areas that a charitable organization can focus on through Facebook include: listening, raise funds, sharing content, engaging with supporters, driving action, and raising funds (Wilbert, 2008)Listening is a key area that any successful charitable organization must focus. Such an exercise is helpful in informing the staff and enhancing the management on how to deal with misconceptions about the organization.
The company can best listen by encouraging its supporters to express their opinion on Facebook comments. They can then monitor the comments and likes to draw necessary conclusions. The other way is by providing valuable content. (Ahmed, Sullivan, Schneiders, & Mccrory 2010) noted that most people are engaging on Facebook because they hope to become more informed.
Take advantage and post information to your supporters. For example, an organization dealing with responding to disaster can post information on how people can help, say by volunteering. The other way a charitable organization can use Facebook is to engage their supporters.
Facebook has some intimacy associated with it and engaging these supporters helps to bring out that intimacy between the organization and its supporter (Tagtmeier, 2010). For example, you can respond to comments posted on your wall or even upload photos or videos of events and tell your supporters to like them.
You can also provide “contact us on Facebook” buttons on the website. In addition, you can also provide links to your other social media platforms or websites (John, Cheema, & Byrne 2012). For example, you can tell your supporters on Facebook to also follow you on Twitter(Flandez 2011). Contact opinion leaders who are in the same line of work you do. For instance, you could tell a popular philanthropist like your page or to ask his/her fans to like your page
A charitable organization may consider using Facebook to drive action or raise awareness. The organization may ask supporters to provide their information that can aid in reaching them. opined that this information can be used in the future communications to convert these contacts into donors. Set up events on Facebook and provide the option of responding.
You could also use Facebook to acquire emails of people who have joined the organization’s groups. The organizations may also start pages for each campaign which would encourage people to support the organization’s efforts (Jakab 2012).
A nonprofit or a charity organization relies on donations for funding. Facebook provides a new channel to raise these funds. For example, one may integrate the Facebook profile of the charitable organization. Here, you can create widgets and direct users to your page.
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