Capabilities and Resources of LinkedIn - Case Study Example

Capabilities and Resources of LinkedIn Executive Summary LinkedIn is one of the major social networking sites in the world today. The site takes is inclined towards linking all types of professionals. Reid Hoffman who acted as the CEO until 2007 established it in 2002. The company has maintained its social networking based on the need to link up professionals from various fields. The major sources of income from the company are mainly through advertising, premium accounts, and job postings. The scope of these income-generating activities can be enlarged through provision of professional-inclined services such as conference proceedings and seminars and schedules therein. In addition, the company can expand its operations in provision of affordable intranet services to companies. The company has grown tremendously. As at 2011 December, the revenues had reached $522, 189 with the number of employees also increasing to 2,116 employees. It has also been able to establish its headquarters in Mountain View, California and 14 other regional offices. The social media industry is ripe and there are many opportunities for LinkedIn. The Asian market remains not fully exploited. In addition, there are other social networking platforms that the company can use to expand its operations and hence profitability. The company should stick to its focus on professionals in order to occupy its market niche. Despite these, various issues that confront the company. Firstly, there is high competition; Facebook, Twitter, Google+, and Xing provide a big competition that has kept the stake of the company on medium in the social media industry. Secondly, the number of unique visitors is relatively low. Thirdly, the site has limited strategy of getting new subscribers; it usually occurs through referrals. Finally, the amount of time that is spent on the site is relatively lower. Introduction and Internal Environmental Analysis LinkedIn is one of the major social networking sites in the world today. The site was started in December 2002. He was joined hands by his forms colleagues at PayPal, Stanford University, and Socialnet.com. The company has been growing since then courtesy of a number of facilitators such as technology, management and the socio-economic environment. Reid Hoffman who is the president of the company founded the company; he was initially the chief executive officer (CEO) before the company hired its first CEO, Dan Nye in 2007. Nye resigned in December 2008 making Hoffman to reassume the role of a CEO. The management was later modified through the entry of Jeff Weiner as the CEO. The company began small but it has exhibited substantial growth. The official resident of the company was based at Hoffman’s apartment, it has moved to securing an office location at Mountain View in California in addition to having regional offices in 14 countries. Its revenues have continued to rise year after year with financial support being sought from left right and center; initially venture capitalist, Sequoia capital facilitated the company in raising $4.7 million. There has been a very encouraging revenue growth; in 2007, the revenue was $ 32,486 and as at 2011 was at $ 522,189. In terms of its staff and online members, the growth has been very positive. The year ending 2003 saw the company with only fourteen employees and only seventy eight thousand members, these figures have completely changed with 2,116 employees. In addition, its growth was slow and steady in the early years reaching about 20 million users in 2006. However, the figure has more recently skyrocketed to include about 259 million users as of June 2013 (Duggan and Brenner 2013). The launch of LinkedIn came at a time that the social media networking was at the initial stages of development. The success of LinkedIn at the informative stages was characterized by the presence of smaller networks within US and across the world. The company did break even in March 2006 after its introduction of advertising and subscription fees, which earned revenue to the company. The incorporation of corporate services on top of premium subscriptions was a major boost to the profitability of the company. In, 2007, the introduction of intelligent application platforms was a major boost to the innovativeness that was exhibited by the company in its operations. There was an overall effect on the company’s profitability. The introduction of company profiles and mobile devices web application a year later saw the company gain much popularity in terms of the subscriber base. Another landmark innovation was the development of the social platform in various languages. In 2008, the Spanish language-version was developed. Analysis of Capabilities and Resources of LinkedIn using VRIN Framework Resources Capabilities Brand The company has the reputation of being one of the major social networking sites that provides networking between professionals. Management The stability of the management team led by the Company’s chairman and the CEO who is also a director of the company provides a perfect combination for the development of business operations. Staff The company has the best talent in terms of creativity and innovativeness. The company acquisitions also provide a blend of workforce. Location The development of offices in 14 countries in the world provides a platform for the development of business operations in the individual countries. Financing The company is making profits Technology The company provides the best platform for the adoption of modern technologies. External Environmental Analysis LinkedIn interacts with the external environment in various ways. Various social, political, technological, and economic factors do influence the way in which the company operates. In its expansion plans, the company adopted a strategy of making acquisitions of other companies. One of its first acquisitions was mSpoke, a company that facilitated the development of technology at LinkedIn. The other one was ChoiceVendor, followed by CardMunch in 2011. There are many competitors to LinkedIn but the company has adopted strategies to counter the competition. Facebook, Google+, and Twitter are the main competitors in the social media industry; however, the differentiation strategy adopted by the company has kept itself on a growth path. This strategy has been characterized by specialization in linking professional as well as acquisition of other companies. The market networking market services exhibits a lot of competition. LinkedIn worked hard to claim its share of the $69 billion market in advertising by 2010. Professional networking services provided a major challenge to the potential that could have been taken up by LinkedIn; these include Xing Ag, Viadeo group, and Monster among others. Other organizations competed with LinkedIn such as recruiting companies and hiring agencies. This resulted to an increased need to remain competitive within the dynamic market. PESTEL Analysis Political Factors: The government keeps on regulating technologies, pricing, and influences competition in a market through the policies that are developed. The government policies bars some of the non-compliant companies hence LinkedIn benefits because of the reduced competitiveness. The entry of LinkedIn occurred at a time when social media was being developed, the policies were not well defined hence it was an easy affair. However, despite these, the government regulations continue to change and the company is affected. Economic Factors: The rising costs of developing technologies are a major factor that will influence LinkedIn. Highly talented staff as well as innovative technologies is costly but the returns are also good. Exchange rates and the economic policies of the host country especially on the aspect of foreign direct investments affect the company operations. Competition also from other market players contributes greatly to the reduction of the market share despite the rise in revenues. One major economic advantage that the company holds is that it already has a huge online traffic hence attracting many online advertisements. Social Factors: Social media is experiencing a paradigm, there is a shifting trend towards messaging which is not provided by LinkedIn. This change can cause a reduction in the market stake that is held by LinkedIn. Another aspect is that employers have highly adopted the use of hiring agencies in getting employees instead on relying on LinkedIn. The hiring firms are competitors hence there is the likelihood that the market may be diluted. The social scope has been broadened through the social media, this means that people do not have to personally meet whether at home or at workplace. The virtual world that has been created by the social media provides a perfect opportunity for LinkedIn to consider developing its operations to take care of individual social units such as family, church etcetera. Technology Factors: LinkedIn is built on technology hence it requires to keep abreast with technological changes. There are changing customer demands that come with the latest developments. Currently many applications and mobile devices have been developed. The company should be conscious that it should be at a position of keeping pace with these advancements by developing complementary applications as well as highly competitive products. In order to hold their position in advertising and gain more market, they will have no option rather than developing strategies that facilitate the realization of competitive technologies. Environmental Factors The main environmental factor that can influence LinkedIn, though indirectly is the aspect of electronic waste disposal. Development of regulations that limit the use of electronic equipment can result to increase in the cost of electronics, hence not so many individuals are able to afford. This may reduce the number of individuals subscribing especially considering the less developed countries where there is high poverty levels. Legislative Factors: The legislations developed within the states of US or other countries where LinkedIn operates can affect the operations of LinkedIn. These legislations can either provide opportunities for the company to expand its operations or hinder its operations through enactment of stiff measures. Porter’s Five Forces Analysis Threats of New Entrants There are new social networking sites that are developed on daily basis. This makes the threats for new entrants to be moderate to high. Other social networking sites have a broader view in their networking strategy as compared to LinkedIn. One of the strategies that can be effectively applied in an attempt to reduce the impact of new entrants is by either switching the cost or diversifying. In addition, the availability of LinkedIn in various languages provides a platform to reduce the impact of the threats that are imposed by the new entrants. Rivalry between Competitors There is a stiff competition within the industry. LinkedIn is one of the major players but it has three categories of competitors; from the mainstream social media sites such as Facebook, from professional networking services such as Xing AG and from professional hiring and advertising companies. The ability to attract more users is based on the capacity of the existing subscribers in inviting them. Threats of Substitute The threat of having a substitute is moderate since the various service providers do not offer the same the same type of services offered by LinkedIn. For example, Monster is inclined to searching for jobs. With the potential expansion of the industry, there is likelihood that there will be threats of new entrants. Bargaining Power of Suppliers The bargaining power of the suppliers is non-existent in such a scenario where we are dealing with a website. Bargaining Power of Buyers LinkedIn is the largest professional networking site in the world, it has a large stake hence the bargaining power of the buyers is moderate or low. This is attributed to the view that the buyer groups are not concentrated coupled with the high concentration of LinkedIn in the professional social networking industry. SWOT Analysis of LinkedIn Strengths: The company has many sources of revenue, that is, in advertisement, premium accounts, and job postings. It incorporates all professionals from all fields hence it is capable of linking all types of people from various professional backgrounds. The company has heavily invested such that it can sufficiently support its projects. It stands out as the most respected and highly credible professional networking site. It provides online services such as corporate intranet services Weaknesses Compared to its competitors such as Facebook, there is low time spent on the site per session per user. The site provides limitations in accessing all the members. The number of unique visitors is relatively low compared to Facebook and Google+ The site provides limited networking since an individual interacts with people known to them. Opportunities The Asian market is ripe and can be easily captured by the site to expand its market stake. The social applications that are available on other sites can be a platform for the growth of LinkedIn. Providing other services that promote professional experiences such as professional lectures, and conferences proceedings among other services Threats Stiff competition from the major industry players, especially Facebook Lack of a clear distinction especially among the young professionals between the social life and work Xing has dominated the European market and is expanding to Asia. Through targeting both individuals and companies, the company stands a chance of alienating both. Recommended Future Strategic Direction In order to remain relevant in the fast changing industry LinkedIn will have to develop the following strategies: The company should retain a professional focus. In this regard it should endeavor to build a strong brand and maintain an identity that will facilitates loyalty to the target market. Expanding to potential areas such as the Asian region Developing a business attitude that will slowly ensure that the company develops more social features to the platform. Eliminating the “Walled Garden” in order to promote a wider subscription. Implementation of the Recommendations LinkedIn should endeavor to implement the expansion strategy within the three months to ensure that the opportunity is utilized. On the other hand, eliminating the ‘Walled garden’ should be done immediately in order to facilitate the acquisition of more customers. The other aspect is that the company should endeavor to build its brand through continued provision of quality services. References Duggan and Brenner (2012), The demographics of social media users. Retrieved from http://www.pewinternet.org/files/old-media/Files/Reports/2013/PIP_SocialMediaUsers.pdf Yoffie, D and Kind, L (2013). LinkedIn Corporation , 2012, Harvard Business School. Read More