Facebook's New Strategy - Term Paper Example

Table of Contents 1 1.0 Introduction 1 2.0Understanding the process of strategic planning 2 2.1 An assessment of how business missions, visions, objectives and core competencies inform strategic planning 2 2.1.1 Mission statement 2 2.1.2 Vision statement 3 2.1.3 Goals 3 2.1.4 Objectives 4 2.1.5 Core competencies 4 2.2 factors that have to be considered when formulating strategic plans 4 2.3 the effectiveness of techniques used when developing strategic business plans 4 2.3.1 SWOT Analysis 4 2.3.1 Pest analysis 5 3 Facebooks new strategy 7 3.1 an organizational audit for Facebook 7 3.2  Facebook’s environmental audit 7 3.3 significance of stakeholder analysis 7 3.4 Future strategy for Facebook 7 4 Understand how to implement a chosen strategy 7 4.1 Roles and responsibilities of personnel charged with strategy implementation 7 4.2  resource requirements to implement a new strategy for Facebook 7 5 Conclusion 8 6 References 8 7 Appendix 8 1.0 Introduction Business strategy is an integral and crucial part of any organization as it not only describes but also aids to achieve its specific objectives and goals. It is one kind of management plan, which enables an organization to increase its performance. It describes the way the organization will achieve its goals. Developing and implementing a strategy is only one part that contributes to an organization’s performance and its implementation does not necessarily guarantee success. In most cases organizations face a very difficult situation and its performance and success is depend on both external and internal factors. Thus the review, implementation and monitoring of business strategies is very crucial otherwise an organization can easily lose focus and momentum. Business strategies can help organizations gain business intelligence. It allows an organization build structures should will protect it from both internal and external shocks. The business strategy outline in the report is an analysis of Facebook’s business strategy. 2.0Understanding the process of strategic planning 2.1 An assessment of how business missions, visions, objectives and core competencies inform strategic planning 2.1.1 Mission statement A mission statement is the communication made by an organisation detailing its reason for and hoe it intends to serve its different stakeholders. The key stakeholders include its investors; employees and customers but other stakeholders that can also play a role in organisation include the government or the communities around the organisation. A mission statement is usually longer than the vision statements and it includes a summary of an organisations values. Values can be described as the beliefs of a group or an individual and in this case those of an organisation. Facebook’s mission “To give people the power to share and make the world more open and connected” Individuals utilise Facebook to share and stay connected with their families and friends. It allows them to explore and discover what is taking place around the globe and to express and share what matters and what is important to them. The statement is very effective in communicating to the public on Facebook’s purpose. 2.1.2 Vision statement On the contrary, a vision statement is an organisations future oriented declaration that encompasses its aspirations and purpose. In other words, one can say that a mission statement describes the organisations reason or purpose for being and the mission statement bases its future or pegs its future on that purpose. An organisations strategy should flow or be derived directly from its mission since it intends achieve the organisations mission and thus satisfy its vision. In most cases vision statements are relatively brief and to the point. Facebook’s vision is given below. “People use Facebook to stay connected with friends and family, to discover what’s going on in the world, and to share and express what matters to them.” Facebook’s mission statement tries to portray what its founders intended it to be used for. The three main reasons that make people use Facebook are to connect with family and friends, share posts and updates about themselves and expressing what is important to them. Initially Facebook’s focus was connecting people but it has evolved to connecting companies and organizations. The statement is very effective in communicating to the public on Facebook’s purpose. 2.1.3 Goals Goals are what human beings desire to achieve, it is a specific target or an end result. It is an organization’s main step towards the achievement of its targets. In an organization a goal is its destination and is described, as its contextual planning that will allow it achieve its target. The top management structures of an organization are tasked with coming up with its goals and the rest of the employees will follow the contextual planning so as to attain the goals. 2.1.4 Objectives In most case, people confuse goals with objectives and they do not know the difference between the two. An objective can be described as a measure of the progress that an organization needs to reach its targets whereas goals give detail information of the destination. The objectives are the step taking by an organization towards the attainment of its goals. Hence the objectives rare usually part of the goals and not the other way round. 2.1.5 Core competencies It is an important component in the success of any business. The core competences give an organisation and edge of competitiveness over the other companies in the market. If an organisation is competitive, it can easily penetrate into any segment of and type of market.       2.2 factors that have to be considered when formulating strategic plans . 2.3 the effectiveness of techniques used when developing strategic business plans 2.3.1 SWOT Analysis Strength Weakness Over a billion and half active monthly users Access to huge volumes of user data such as user personnel information, habits, and preferences Transformed the way people interact socialize and communicate Inability to manage user feeds that cause congestion on the website reduces user experience The website has experienced security and privacy issue in the past It only contains a single source of revenues through advertising Opportunities Penetrating into new and unexplored markets and adding more users Increasing number of its users accessing the website through their mobile devices It has reached saturation in and losing users in its core market An increased number of people accessing the internet through their mobile devices New social networking site offering similar product A detailed description of Facebook’s SWOT analysis is contained in the appendix section 2.3.1 Pest analysis Political factor Facebook has faced criticism from its users and governments because of its privacy policies. Facebook collects and uses its user’s information in several ways including developing advertisements, storing for future use or selling to third parties for a small profit. This concerns could hinder facebook’s strategy of developing is ads using information derived from its use. In the recent past, Facebook faced a suit filed by some of it users who were demanding for competition because Facebook has using generated information to develop its advertising campaigns or to sell this generated information. Most of its users regard their accounts as private space and what Facebook to respect their space. Several countries have raised concern over the same issue (Li 2013). Economic factors Facebook has experienced high revenue growth rates when compared to its peers. Its revenue has growth by more than 80% between the 2013 to 2014 financial year. In the same financial year, Google revenue grew by only 30%. Facebooks growth rate highlights its potential for generating vast sums of money and drive growth. The other economic advantage that Facebook enjoys over its peers is the fact that it enjoys a relatively lower expenses base. This little margin has enabled it gain higher profit margins compared to its peers. High-profit margins and better-aligned cost structure will be able to produce low advertising rates while remaining competitive. In addition, the company enjoys strong cash flows. In the financial year ending 2014 its cash flow was over 40%, which is much higher than the average and that of Google that stood at just over 30%. It converted over 12% of its sales into free cash flow, which give an indication that the social networking site enjoys a higher financial flexibility than most of its peers. Social factors Facebook ventured into the mobile application market when it launched App Center, over the years the company has acquired small startup firms. Technological factor Despite the fact it is primarily based on adverts for revenue generation, the adverts are yet their effectiveness due to the intrinsic business model adopted by the social networking site. When compared to its peers Google is well positioned to attract the online advert market that Facebook cannot exploit. The type of method Facebook user to place its ads is not efficient and it hurts the user experience. For instance, Facebook makes 10% of the revenue that Google makes even though it has twice the amount of page views. Furthermore, the search revenues of Google are 200 times than those of Facebook. In addition, the click-through-rate of Facebook is 10% that of Google. The comparison suggests that Facebook offers its customers and advertisers less value in terms of variety, results in and value for money. The focus of Facebooks business model is to attract and retain social networking users and it has to driver for demand to make ore profit this is very different from the business model used by Google (Ireland, 2008). 3 Facebooks new strategy 3.1 an organizational audit for Facebook 3.2  Facebook’s environmental audit 3.3 significance of stakeholder analysis 3.4 Future strategy for Facebook 4 Understand how to implement a chosen strategy 4.1 Roles and responsibilities of personnel charged with strategy implementation 4.2  resource requirements to implement a new strategy for Facebook 5 Conclusion 6 References 7 Appendix Strength Weakness Integration with other websites and applications It has amazing user experience where users have freedom of what to post An understanding of its users behaviors and experiences Its average loading time is much slower compared to other social networking sites at Lack of website customization options for its users Very poor CTR of advertising Lack some features that other social networking websites offer Opportunities Threats Diversification of its sources of revenue Facebook as an open marketplace Stunted growth rate of its online advertising The inability to identify theft and address security concerns Weak and unclear business model Strengths Access to huge volumes of user data Given that the website is a social networking site, it allows its user to share personal information such as habits, preferences, likes, and dislikes. The social networking site has access to an enormous volume of data and if it properly analyzed can be a source of valuable information. The information derived from the analysis can be sold to marketing and business companies hence developing a second source of revenue. Integration with other websites and applications To improve user experience and attract more users to its site, Facebook has introduced several features that encourage integration with other websites and applications. It has developed a mobile application that integrates its website into mobile phone devices. Easy and user-friendly integration with another site together with access to it services through mobile applications has enabled the social networking sites gain a competitive advantage over its competitors More than a million active monthly users A social network success is measured by the amount of users it has, the more users a system has, and the more successful and socially connecting it is. It is the case with Facebook. With over a billion users, Facebook is the most politically connected networking website in the world that it can connect people from all over the world. Amazing user experience Facebook has a simple user interface, which allows users of ages as young as 12 years. The interface enables it user to have instant access to other websites such as YouTube and to access the site from different platforms including mobile devices and the PC. In addition, it contains more than seventy different languages, which can be used to translate post written in a different language An understanding of its user’s behaviors and experiences With the exception of Google, no other company has access to an enormous volume of information containing the preferences, dislikes, likes, and needs of its users. In addition, the website has features that other social networking sites do not have. Weaknesses Weak CTR of its advertisements Unlike its competitors, Facebook has a much lower click-through rate. It figure of 0.5%, it’s much lower compared to the average social networking website that currently averages 4%. Given that advertising its sole source of revenue and o ensure that it earns more money from its adverts it has to find a different way of displaying its ads. The method should balance by maximize advertising potential, but it should not interfere with user experience. Lack of some essential features While Facebook has a variety of relevant and engaging applications and features that its competitors do not have, it still requires dislike buttons, the option to unsubscribe from alerts, and lack of group or video chats. Lack of other sources of revenue Over eighty percent of Facebook’s revenue is derived from placing advertisements on it a social networking website. The growth of its revenue is directly proportional to the growth of its users. It is very dangerous, and it leaves the site exposed to and dependent on the growth of its user. In addition, given the fact that it already has a huge number of users its revenue growth will slow down. Negative attitude towards the privacy of its users The data that Facebook collects contains valuable information on its users. Facebook stores this information for future use, analyze it for personal use or sells it to other parties. This behavior by Facebook has generated criticism from its user regarding the safety of their information and their right to privacy. This action is starting to affect its performance and discouraged it some of its users to abandon it. Inability to customize its website Many of Facebook users have the desire that their accounts should reflect their personalities. One of the disadvantages of the social networking interfaces is that users are unable to customize their websites to reflect their personality. The users are forced to use the default interface and template when creating their profiles and using the site. Facebook has the highest number users in the social networking industry. It makes it very hard to manage all of them. Because of it has vast number of users, Facebook is prone to cyber crimes and attacks with thousand of its user account hacked every day. Facebook is not doing enough to ensure such attacks are stopped or minimized. Opportunities Increased number of users from the mobile platform Although a majority of Facebook users to be over six hundred or about sixty percent access its website through the mobile platform. Although the mobile platform group makes up 60% of its total users, it only generates 14% of its total revenue. The potential to make more money from this group is very high and give it an excellent opportunity to improve its revenue base (McCarthy 2013). Penetration of the Chinese market China is the most populous country in the world with a total population of over 1.3 billion. Given its population, good economic performance is easing, and government regulations may give Facebook an excellent opportunity to enter the Chinese market. Even if it captures a quarter of the market, Facebook will be guaranteed to three hundred million users, which will be more than the entire population of the United States. Diversification into other sources of revenue Facebooks primary source of income is placing advertisements on its social networking site. The fact that it is the second most popular website in the world with more than a billion active monthly is a significant advantage and an excellent opportunity to come up with several sources of revenue. Facebook as an open marketplace With its vast number of users distributed around the world Facebook has an excellent opportunity to use it website as one huge market, where it can promote and sell goods and services from third party companies for small fee. The venture will earn facebook much need income and diversify its income generating activity away from just placing advertisements on its website (Kourdi, 2003). Threats Increased number user accessing the Internet through the mobile platform Currently, the largest group of its users access its website through the mobile platform. Although the number of mobile users is 600 million accounting for close to 60% of all the users, this group only generates just over 14% of its total income. It the company is unable to generate more income from this group it will face decreasing revenues. Use of ad-blocking extensions Technologically knowledgeable users are increasingly installing extensions that block adverts from the website while they are using it. Considering advertising is the primary source of income for the site, and a growing number of its users are using the extension, the company’s business model it threatened and at significant risk Slowing growth rate of online advertising Although, Online advertising is the fastest form of publicity currently growing at double digits, its growth rate is slowing down. This slowing growth rate is putting pressure on facebook’s ambitions of increasing its income by double digits since most of its revenue comes from advertising. Identify theft and security concerns Identity theft is very common on Facebook that it is starting to affect its business model. The identity theft cases are reported the more criticism is directed towards Facebook. This criticism is strongly damaging Facebooks image and brand and threatening its success. The other criticism directed towards the company is the ease with which people use its platform to carry out crimes such as conning people. Weak business model The company’s business model is quite straightforward; it attract social networking users displays adverts on its website after receiving a small fee from businesses whose adverts are being shown. At the moment the model sounds solid but external and uncontrolled conditions may cause the company difficulty and could affect its business model. For example, the declining rate of online advertising is out of the control of the company but if it were to get worse, it could severely affect the company’s capacity to generate revenue. Competitor analysis Currently there are quiet a number of social media and networking websites that offer the same or similar services to those of facebook. Although the competitor’s are many Google is the only realistic competition. Performance metrics Capabilities Objective and values Strategy Facebook Over a billion users Enhanced user experience and the ability to connect people from all over the world Make the universe more connected and open Facebook market itself as a platform for users to share and connect with each other Google+ It user number are estimated to be over 30 million users. It integrates all of Google’s Services into one platform Organize the worlds information and make it useful and universally accessible Google markets it itself as platform for user to share by integrating all the other services of Google making it easier, user friendly an more convenient to use Google. Read More