Facebook IPO - Market Competition - Article Example

? Facebook IPO Facebook IPO Facebook will be making one of the richest Initial Public Offer (IPO) for a technology company in the world on Friday of May 18 2012. Facebook stocks will be traded for $38 per share. It is noteworthy that the stocks will traded in on Nasdaq under the symbol “FB”. This will make Facebook the world’s leading social network by capitalization considering that its value will stand at $104 billion at the share offering. The social network is on course to raise $16 billion through its initial public offer. The company will certainly rank among major share offering in the United States taking into consideration that Facebook stands third behind Visa and General Motors. The IPO has undoubtedly portrayed a profound revolution and growth of the company, which was formed eight years ago in Harvard as a dormitory project. The social network will be issuing 420 million common stock shares of which Facebook will sell 180 million of its share while an additional of 241 million shares will come from previous shareholders. After the initial public offer Facebook will be ranked among the most valuable US technology corporations, where key players such as Amazon, Google, Cisco and Apple owns the majority stake in the industry. Background Facebook is the widely known and used social network. Facebook first entry was in 2004 and had accumulated over one million users within one year. Statistics shows that the number was around 100 million users in December 2008 and 200 million in June 2009, which is doubling of the figure in six months period. Currently, this social network is globally recognized and available in 4 languages (English, French, Spanish and German) and sources say it is spreading its wings to include 22 more languages (Weir, 2008). Facebook is preferred for its user-friendly applications, such as Facebook Online Chat, launched in 2008 and this feature is a popular real time messaging market applications. Facebook is a global with hundreds of millions people using it to inter-connect and check in on friends/relatives, upload photos, share videos and links, meet new friends and have updates of how their friends are fairing (Facebook, 2010). Market Competition According to Nick Wingfield, author of the article, Apple vs Facebook, these two companies are not big rivals or competitors. According to the author the companies’ relations is comparative to the relationship between United States and China. These companies have immense powers in their own right. They are neither friends, nor hostile to each other. The apparent reason why Apple and Facebook are not rivals is because Facebook don’t develop operating system, computers, mobiles and tablets. Implications for Competition (Rivalry among the Companies) Apple’s social network, Ping, is not such popular apart from its users who have musical preferences on iTunes. It is obvious that its creation was not meant to challenge Facebook. Apple’s late CEO, Steven P. Jobs, professed that he admired the Facebook CEO and co-founder Mr. Mark Zuckerberg. He hailed praises to Mr. Zuckerberg for his role of trying to build a lasting Silicon Valley company and not selling it. Recently, tension has been realized between the two companies. After Ping introduction to the market two years ago, the two companies could not agree on how to integrate Facebook with the Ping services. This would have enabled users to use Ping to interact with their Facebook friends. Mr. Jobs told one of the reporters that Apple could not work with Facebook on the Ping issue as Facebook was demanding difficult terms they could not agree on. Strategic Alliances Facebook launched alliances in the summer of 2008, with Netflix and Apple to promote Facebook Connect. With regards to Apple, the platform allowed Apple to use Facebook Connect to promote its products. Netflix members were able to link their Facebook and netflix accounts through the Facebook Connect. This helped to expand communication by making it possible for Netflix users to discuss on their favorite movies using Facebook Connect. The users can also rate a movie from 1-5 stars and also post reviews. Members share this information to and from Facebook, where their friends can view it regardless they are or are not Netflix subscribers (Nick, 2012). Secondly, the alliance with Apple was to expand the iPhone/iPod touch, making easy connection with your Facebook friends in your favorite applications from Apple’s storehouse. For example, you can share anything with your iPhone applications with your Facebook friends by posting comments to and back through your profile. Moreover, Facebook has also formed a strategic relationship with Microsoft to expand an advertising deal to cover international markets. Microsoft took a $240 million equity stake in Facebook. The international languages are boosting foreign demand at an astonishing rate (Nick, 2012). Competitive Advantage Facebook features are user friendly. It is also common where three or four people works together in the creation of Facebook products usable by millions of people globally. On the other hand, Microsoft, Intel, Google and Dell have been out-paced by Apple 6X. This is because of Apple’s segmentation strategy. Market segmentation is the definition and sub-dividing the homogeneous market into addressable and targeted needs. These segments are thresholded into psychographic, demographic, and budgetary constraints. To build products and get hold of the market opportunities (Nick, 2012). Market segmentation enables companies to drive incorporated product solutions that are in agreement with, customer outreach, messaging and channel strategies to sell and support the customers. In this regard, market segmentation is a product maximization strategy. The strategy is implemented by stuffing products with many different features, targeting specific user experiences, and building their products around that. Apple’s iPod event has completely and rebooted iPod nano, rolling out back the iPod to an earlier model, and has forked the iPod Touch where it interacts with iPhone positioning. This is some of the competitive edge strategies that has enabled these two companies to be leading in their market specialty (Adler, 2011). Cash Flow Facebook Chief Operating Officer Sheryl Sandberg talking about the company's financial prospects said that they expected to grow their revenue 70% in 2011. He noted that they have been profitable for five consequent quarters on their earnings before taxes, interest, depreciation, and amortization. He said that they were on a very good path to cash-flow profit. According to IHS iSuppli, Apple operating system’s market share of worldwide tablet space would be reasserted in 2012. After recording tablet sales of 55.1% in the last quarter of 2011, the segment is expected to recover to 61% by the end of 2012. Apple’s dominance in media tablet sales in 2011 had fallen due to a gush in the sales Google’s based Android operating system of Kindle Fire tablet. This had caused Android’s tablet market share to rise to 41.5%, up from 31.5% by the beginning of the fourth quarter in 2011. References Adler, J. (2011) Sheryl Sandberg on Facebook’s Future. Retrieved: http://www.businessweek.com/technology/content/apr2009/tc2009048_429871.htm Bateman, S., & Scott A. (2011). Management: 2nd Edition. New York: McGraw Hill. Nick, W., (2012). Facebook vs. Apple. retrieved: http://bits.blogs.nytimes.com/2012/05/17/facebook-vs-apple/# Read More