Strategic Analysis of Facebook Inc - Term Paper Example

?Running Head: STRATEGIC ANALYSIS Strategic Analysis of Facebook Inc. Introduction In existing business environment, there are a number of different issues faced by business organizations. Owing to different environmental issues faced by the company, its performance in the share market varies accordingly. For this purpose, it is quite essential for an investor to have some intensive analysis of the business, marketing and financial performance of the organization within the market place (Kotler, & Keller, 2012). In this regard, the business organization selected for the paper is Facebook Inc. Facebook: about the company Facebook is regarded as one of the most prominent social networking service provider company. The company was founded by Mark Zuckerberg in the year 2004. The company is headquartered in Menlo Park, California. In recent period of time, the company has become quite popular tool of social network among its users (Veer, 2011). Services of the company The company provides the facility to its user of sharing information, posting their photos and videos, connecting and chatting with other person, joining any group, and playing online and interactive games. In order to avail such social networking facilities provided by the company, the user is required to make his own account on Facebook with the help of its e-mail Id. Nowadays, in order to make the usage of this site easy and convenient; Facebook is available on the user’s smart phone also (Business Summary, 2012). Type of the firm Earlier the firm used to operate as a private business organization within the marketplace, but in 2012, the company has become publicly traded corporation by launching one of the largest IPOs in US stock market history (Business Summary, 2012). Scope and size of the company In existing period of the company operates at vast scale. In existing period of time the company owns about 955 million users and more than 3900 employees World Wide. In exiting period of time the company has some intensive scope for the further growth. The company was selected as the second top visited website after the Google in the year 2011 (BBC: News Technology, 2011). Moreover, by the end of September 2012, in the Europe the company has about 243.2 million users, which indicates the size and scope of the company (Facebook Users in the World, 2012). Industry Structure and Global Markets The company operates in the industry of Internet Information Providers. In the existing period of time of where Information Technology has become quite advanced and effective, this industry has become quite competitive. This industry can be characterized as wide-ranging competitive industry. In this direction, the company is facing some stiff competition provided by other social networking facility provider company. Among such competitors, some major competitors of the company are Google, Microsoft, and Twitter Inc. In the competition of Facebook, Google has recently launched its social networking utility, namely Google+. Moreover, there are other social networking utilities such as E-buddy, blackberry messenger, Linkdin and so on, which are delivering some intensive competition to the company (Business Summary, 2012). In existing period of time, the company is enjoying some favorable business conditions across the world. As internet penetration across the world is increasing rapidly. Moreover, the interest of young generation towards social networking is also enhancing quite intensively, which shows some positive conditions for the growth of the company (BBC: News Technology, 2011). In direction to this, the company has registered some intensive market growth in terms of international presence. The total number of users of the company across the world can be presented as below: (Source: Facebook Users in the World, 2012). Economics Before the year 2012, the company was not traded on stock market. In May 2012, the company launched its IPO. The opening share price of the company at that period of time was $38, which was considered overvalued by traders. Owing to this perception the value of share price of the company started to be decreased. Since after the starting, the share price of the company has not been able to touch its opening prices. The presented graph is showing the variations in the stock price performance of Facebook in the market. (Source: Basic Chart: Facebook Inc, 2012). The prime reason of this decline rate of stock price of the company despite increasing number of users is the lack of attention of the company over advantage of advertising market such as mobile-advertising and display-advertising. The major source of the earning of the company is mobile marketing. In existing period of time, the market of mobile advertising has become quite wide due to the increasing numbers of intent services users. In relation this, easy availability of internet on mobile phones has made it quite easy for marketers to advertise their products through mobile marketing. Owing to this reason, marketers are focusing on the websites that are frequently used by people for the purpose of placing their ads. In this context, Facebook is having some ample amount of opportunity for future growth and success. In existing time period, the company is placed as sixth position for with 2.8% acquisition of the share of Global Mobile advertising industry. In this competition Google Inc. tops in industry with 55% of acquisition of the market. In direction to this, the company is not able to generate as much revenue as it should be and this is the prime reason behind the negative fluctuation in the stock price of the company in the market. Corporate Philosophy and Organizational Structure For the purpose of undertaking exploring the strategic orientation of the organization, it is quite essential to have some crucial and comprehensive understanding of the some specific guidelines or mission statement. The mission statement of the organization reveals the direction of different activities undertaken by the business organization (Kotler, & Keller, 2012). In the context of Facbook, the mission statement of the company can b reflected on the log in page of the company’s site. The Mission statement of the organization stats “Connect with friends faster, wherever you are….” (Facebook, 2012). In this way mission statement also reflects the corporate philosophy of the organization, which depict that all the services of the company is directed to build a crucial and close network for its customers, through which he can remain in the touch of his friends and relatives anywhere and anytime. In addition to this, the company’s core principal includes the perseveration of its organizational culture. The intention of the company can be reflected in the statement of its Head of Online Operations, Mr. Sarah Smith, “Maintaining culture is one of the top priorities we have as a company… We’re trying to be really smart and learn about our growth. So we’re focused on building a few offices, but making sure they are really tied into the culture” (Purkayastha, & Qumer, 2011). On the basis of this statement the management philosophy can be assessed as cultural centric and open to innovation philosophy. As per the philosophy, the employee within the organization gets some intensive opportunities for the purpose of driving innovation within the organization. In addition to this, the leadership follows within the organization is quite assertive, every employee within the organization is encouraged to contribute in driving innovation within the organizational culture. The organization structure followed within the company is quite matrix, as there are a number of different level of hierarchies. Each business line and hierarchy is managed by the head of the department. The company believes in the centralized management Philosophy (Wittkower, 2010). Technology/Innovation From the technical perspective, the company can be considered quite innovative and creative. The innovative intentions the company can be reflected in the frequent changes and effective as well as new innovative Facebook features and applications launched by the company. Recently the company has provided the ‘Time line’ feature for its user with the help of which they can change the appearance of their account. In addition to this, the time line feature has also provided some intensive amount of different other advantages to its users. In direction to this, for the company it is quit crucial for the organization to encourage its employees to be innovative and effective (Baloun, 2007). In this regard, the company provides some crucial as well as effective platform to its each employee on which, he can easily express his innovative ideas and measure to convert them into reality. In order to be innovative and effective in existing market place. The company does not have any physical laboratory for the purpose of developing new features. The company has recently launched the feature of video calling or chat for its users. As per this feature, a user can also undertakes live video chat with his online friend. The company has transcended this feature for the purpose of promoting the website among its users ((Miller, 2011). Marketing Analysis In order to understand the effective disposition of the company in the market it is quite essential to reveal its marketing activities and strategy of the company undertaken by the company. The marketing activities of the organization reveal the some of the intensive strategies and policies undertaken by the business organizations for the purpose of marketing its products and services offered to the customer, in this regard it is quite essential for the organization to undertake some comprehensive analysis of its existing strengths and weaknesses in existing period of time (Kotler, & Keller, 2012). The analysis of marketing activities of the organization can be undertaken within some different headers explored as below: Marketing Mix for the organization The marketing mix for the company can be explained as per four crucial P’s of marketing discussed as below: Product: the prime product of the company is the social networking website provided to its users. There are a number of different services such as photo uploading, downloading, viewing contents and posts of others, and posting of the status, connecting and chatting with friends, finding friends, creating community and network, and so on, provided by Facebook to its customers (Baloun, 2007). Price: The Company does not charge anything its users for the creation of a new account. The prime source of income of the company is the advertisement placed by different business organizations on the website of the company. The company charges price to the marketer who wants to place their ads on the website of the company. Enhanced disposition of the social media marketing is also one of the prime reasons regarding the growth of revenue of the organization. Place: The Company operates on a virtual platform only. Owing to this reason, internet is the sole place of delivery of the service designed by the company for its customers. In existing period of time along with desktops, and laptops, Facebook is now available on mobile phones also. Nowadays, users can access different services provided by the company on their mobile phones also (Rutledge, 2008). Promotion: Word of Mouth is the major source of marketing for the company. On the site, the company provides option to the user for referring facebook to his friends. Moreover, The Company also promotes itself on other sponsored websites. Segmentation In order to undertake any crucial marketing plan it is quite essential for the organization to have some intensive segment basis on which, it can divide its customers in different group. Primary basis undertaken by the company for catering its users is the demographic basis. There are a number of demographic bases such as age group of customers and their perception regarding social networking (Rutledge, 2008). Target Market On the basis of the segmentation basis defined earlier, the prime target market for the company is young and college going students, who has some positive attitude regarding social networking. Moreover, Facebook also cater different type of profit and non-profit organizations, who wants to make a group or community of its customers for their strategic purpose (Weinberg, 2009). SWOT analysis of the organization SWOT is one of the most crucial tools adopted by the business organizations for the purpose of appraising their internal business environment. As per this framework there are four crucial aspects of the business operations of the organizations (Kotler, & Keller, 2012). These aspects can be discussed as below: Strength: The primary strength of the company is the positive perception of the youth regarding the social networking. The company provides some crucial and effective measures of chatting and connecting with friends. In comparison to this, the usage of this social networking utility is quite easy and less complex in comparison to other social networking websites. In addition to this, strong word of mouth promotion is also one of the major strength of the company. Furthermore, innovative features and applications provided to the users are some of the intensive features of Facebook, which distinguishes it from other social networking tool (Gartner, & Bellamy, 2009). Weakness: The problem of hacking and lack of privacy are some of the critical weakness of the Facebook. In direction to this, there are some crucial cases which highlight the weak security of personal data of the user. Although, Facebook has installed some safety related features such as password for their users, yet hackers can hack personal account and personal information of the user and misuse them (Porterfield, Khare, & Vahl, 2011). Opportunity: Increase in the interne awareness among people has induced the perception of people toward the virtual communication among friends. This attitude of people can be regarded as one of the major opportunity available for the company. In addition to this, along with developed countries, there are some prominent developing countries in Asian and African market, in which internet penetration has enhanced quite intensively. The adoption of Facebook is enhancing quite significantly. This is an opportunity for the company in the long run. In addition to this, people and organizations are using Facebook as the means of expressing their ideas among people and making them aware (Treadaway & Smith, 2012). Threats Along with intensive opportunities, there are some crucial threats availed by the company. For instance as Facebook provides freedom to its user to share his contents, photos, videos and point of views in front of the entire community, the sharing of objectionable content and material is quite possible. Owing to this reason, the government of some countries have negative attitude regarding Facebook. For Example, the Chinese Government has banned Facebook in the country. This is the major threat available for the company (Weinberg, 2009). SWOT matrix The presentation of the SWOT framework can be presented in the Matrix format: Strengths Strong word of mouth publicity Easy and less complex account operations Weakness Lack of Privacy Misuse of personal information Opportunities Increasing use of internet across the developing countries Increase trends of social networking and virtual community Threats Chances of posting of anti-social and objectionable contents Strict actions of governments of countries against Facebook Prediction of the stock prices and Market share of the organization On the basis of current stock price behavior of the company as well as Marketing and operational efficiency of the company, it can be predicted that the stock prices for the company will be raised in the market, but at slow pace. It is quite similar to the existing trend prevailing within the market. As the company has recently undertaken some of the crucial innovations in its services, which can lead to enhance its overall market shares, which can trigger the perception of investor over the organization ((Veer, 2011). Owing to this reason, it can be predicted regarding the company that its market shares and stock will improve in the near future. Finance and Marketing Budget For the purpose of revealing the financial health of the company financial ratio of the company and their comparison with Industrial ratios are quite important. In this a chart is presented as below: Ratio Industry Facebook Inc Market Capitalization $226.10 billion $60.3 billion Price/Earnings Ratio 1,877.78 64.00 Price/Earning Gearing ratio 4.60 1.67 Revenue Growth 116.40% 44.70% Return on equity 53.45% 22.45% (Facebook Inc Class A FB 2012) Long term growth rate 69.58% 35.90% (Source: Facebook, Inc. (FB): industry analysis 2012) On the basis of this analysis, it can be observed that key financial ratios for the company is quite positive, which shows financial soundness of the organization. The positive ratios are reflecting that the company has some intensive potential which can be explored by investors in the long run. However, the comparison of its ratio with that of the industry shows that still there is a lot of scope for the further development for the company. As the standards set by the industry in terms of financial performance is quite high, the organization is required to be more effective for achieving such standards (Veer, 2011). Conclusion On the basis of in-depth analysis of the company, Facebook Inc, it can be concluded that company has some intensive potential for the future growth and success. From the perspective of a long term investor it will be right to invest in the company. Reference Baloun, K.M. (2007). Inside Facebook: Life, Work and Visions of Greatness. Karel Baloun. Basic Chart: Facebook Inc. (2012). Retrieved December 5th, 2012, from http://finance.yahoo.com/q/bc?s=FB+Basic+Chart BBC: News Technology. (2011). Google and Facebook top 2011's most visited sites in US. Retrieved December 5th, 2012, from http://www.bbc.co.uk/news/technology-16356066 Business Summary. (2012). Retrieved December 5th, 2012, from http://finance.yahoo.com/q/pr?s=FB+Profile Facebook Inc Class A FB. (2012). Retrieved December 5th, 2012, from http://financials.morningstar.com/ratios/r.html?t=FB Facebook Users in the World. (2012). Retrieved December 5th, 2012, from http://www.internetworldstats.com/facebook.htm Facebook, Inc. (FB): industry analysis. (2012). Retrieved December 5th, 2012, from http://finance.yahoo.com/q/in?s=FB+Industry Facebook. (2012). Retrieved December 5th, 2012, from http://www.facebook.com Gartner, W.B. & Bellamy, M.G. (2009). Enterprise! (Book Only). Cengage Learning. Kotler, P. & Keller, K.L. (2012). Marketing Management, 14th Edition. 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