Facebook Case Study Facebook Case Study

Advancement in web-based technology has created the easiest and cheapest
of socializing. This has been achieved following the rapid development
in social media, which allows people to exchange and share information
in virtual communications and network. Sharing of information is
accomplished through several forms of social media technology such as
weblogs, social blogs, social network, wiki, internet forums, and
micro-blogging among others (Stelzner, 2012). Initially, social sites
could only be accessed via computers, but the technological development
has led to the emergence of mobile social medial that allows the mobile
phone users to access the social sites. Research shows that following
the integration of internet functions in mobile phones social sites are
visited more often than any other site (Herbaman, 2011). Social media
are characterized by increased frequency, permanence, and immediacy
compared to the traditional methods of media. To this end social network
service providers (including, YouTube, Facebook, and Twitter) have
become the most suitable source of news and fasted to commune. This
paper will analyze Facebook, one of the social network sites, focusing
on its history, growth, development, and external environment. In
addition, the paper will address the Facebook’s strategic plan, and
SWOT analysis.
Background information about Facebook
Facebook is one of the social network sites that were started in 2004 by
Mark Zuckerberg, a psychology student at Harvard University (Philips,
2007). Zuckerberg is a computer programmer, who invented Facebook as one
of the social sites (such as Facematch and Coursematch) that he had
created for other students. It is recorded that over 1,200 students at
Harvard University had signed up for Facebook within 24 hours of its
creation in February 2004 (Boorstin, 2012). This marked the beginning of
its rapid growth and usage among the students in different institutions
of higher learning in Boston, starting with Harvard University and later
to other parts of the United States. In 2005, Facebook gained an
additional boost to exploit other markets outside the United States
following the purchase of an address (at a cost of $ 200,000) that
resulted in the name change from “the Facebook” to Facebook.com.
Facebook extended its membership beyond academic institutions in 2006 to
include business people and organization provided they had registered
email addresses. This was a greater achievement, which because Facebook
could fetch income from classical advertisements. By the year 2011,
Facebook had diversified its services to include online photo hosting.
The technological development in mobile media gave Facebook an
opportunity to engage users totaling to over 350 million in October 2011
(Philips, 2007).
Financial Growth and development of Facebook
Facebook obtains much of its revenue from advertisements. Facebook.com
was registered in Florida, with Mark Zuckerbag and Eduardo Saverin as
the equity holders of the company. Facebook had to do some
advertisements to meet the operating costs before Peter Thiel Joined in
2004 after contributing $ 500,000 for 10.2 % equity stake (Turcan,
2012). In 2006 Jim Beyer who was a partner at Accel joined Facebook.com
with a contribution of $ 27.5 million. Jim made this investment despite
the fact that Facebook made a loss of $ 3.63 million in 2005. In October
2007, Microsoft Corporation bought preferred shares at $ 240 million to
earn 1.6 % holding. Facebook initiated monetization strategy in 2008,
which targeted at making Facebook a profit earning company. The strategy
was realized and resulted in a 65 % profit increment in 2012, which
amounted to $ 1 billion (Turcan, 2012. The Initial public offer (IPO)
was announced in February 2012 and would result to capita restructuring
where Zuckerberg would remain with 22 % ownership and 57 % voting rights
(Philips, 2007).
Facebook’s External environment
External environment refers to factors outside the company that may
influence its operations, but the company does not have control over
them. The external environment surrounding Facebook can be divided into
two categories. First, the task environmental factors have a direct
effect on the daily operations of Facebook. They include competitors and
customers who join Facebook by signing up from all over the world.
Facebook has a substantial number of competitors who either offer
similar services of pose a threat to the realization of its strategic
plan through technological competition. Google Incorporation and Apple
Incorporation are the main Facebook competitors because they offer
advertisement services. The two companies have subjected Facebook to
financial and technology threats through innovations and improvements in
the efficiency of their internet services (Tipton, 2013). Other
competitors include Microsoft Incorporation, Yahoo Incorporation, Disney
Online, SINA Incorporation, and Match.com Incorporation among others.
Facebook customers include the large number of people especially the
youths who sign up from all over the world, businesspeople, and
organizations who advertise their products and services via Facebook. To
this end Facebook has been in constant market and technological research
to identify the best preference for its different market segments
(Collies & Magid, 2012).
Secondly, the general environment of Facebook includes economic,
technological, and social cultural factors. Although Facebook was
registered in the Florida, it faces economic influence from differed
countries given that its users are located in different economic
conditions. Similarly, Facebook faces influence from varying political
and social cultural factors from different parts of the world (Tipton,
2013). The technological aspect of the general environment affects
Facebook in that the company has to embrace innovation to retain its
market shares.
A corporate Strategy for Facebook
The critical rile of a business strategy is to outline the alternative
investment plans that will enable the organization achieve greater
heights within a period not less than five years (Craig, 2007). Facebook
on its part developed a strategic plan in 2012 that would make it the
largest social service provider with a market capitalization growth of $
61 billion by 2017 (Owyang, 2012). Facebook has relied on advertisement
as its main source of revenue. However, Facebook would achieve the
strategic plan by introducing new products. This will be achieved
through innovation that would help in designing additional products,
which will target the different market segments. Facebook will venture
in e-commerce. The first face of implementing this will involve an
online feature named as “gifting”, which allow the Facebook users to
send distinct messages (including happy birthday and happy new year) via
a Facebook page (Boorstin, 2012). This will be accomplished by the
addition of a new button named as “want”.
The corporate strategy, which enables Facebook to venture in e-commerce,
is an appropriate plan. However, the accomplishment of the strategy
depends on the effectiveness of the online accessibility of Facebook
products. To this end, the suitable strategic plan for Facebook to
exploit is an enhancement of search services to its users. Currently,
the search services provided by Facebook require that the user identify
the product they want and then bookmark the page to high other brand
monitoring companies (Boorstin, 2012). Facebook can increase its
financial gain sand retain the customers by enhancing the search
services so that customers can get all their services from Facebook
instead of contracting other service providers. This implies that
Facebook will sell the products it advertises, thus doubling its
financial gains. This will be achieved by development of an integrated
search tool and enabled user application platform.
The SWOT analysis for Facebook
SWOT analysis is the beginning of understanding the objective of the
company and the probability of its going concern. The SWOT stands for
strengths, weaknesses, opportunities, and threats of the company, which
are analyzed in this section for the case of Facebook.
Facebook ranks the second in the list of top 500 social network sites.
This has resulted from the rapidly growing number of people signing up
every second (Turcan, 2012).
Facebook has been translated into more than 70 languages, thus making it
usable by people of different language from different parts of the word
(Stewart, 2012).
Facebook has placed strong barriers to entry of new firms. This has been
achieved by ensuring the ease of access, cheap services, and diverse
services such as video conferencing, entertainment, and casual dialogue
options (Turcan, 2012).
Facebook has a strong financial position. This is indicated by the large
profits especially from the mobile advertisements, which contributes
about $ 150 million every year (Turcan, 2012).
The Facebook has poor feedback especially for the frequently asked
questions. Many Facebook users have complained that the company
management does not give proper feedback to its customers (Owyang,
Trend has shown a sharp decline in facebook’s share value. This is a
negative gesture to the stakeholders who include the customers, current
investors, and potential investors (Philips, 2007).
Facebook depends on the users from North America who account for only 20
% of its customers. This implies that the company may experience a slow
growth rate because the North America market is nearing saturation
(Stewart, 2012).
Facebook has unlimited chances for expansion in mobile marketing. The
advance in technology and ease of access of mobile devices will increase
the Facebook users and mobile marketing.
The increasing acceptance of Facebook in other parts of the world and
the evidence that the company has business and moral socialization the
government of China might permit its operation (Owyang, 2012).
Currently, less than 15 % of the world’s population has signed up for
Facebook accounts. This suggests that Facebook still has the opportunity
for expansion (Turcan, 2012).
Facebook faces cut throat competition from established network
companies. Recently, Google established its own social network site
named “Google plus”. The establishment of this site is likely to
reduce the Facebook’s market share significantly given that Google is
a well established internet service provider (Stewart, 2012).
The IPO flop that Facebook faced is likely to affects stakeholders,
including the customers and potential investors, negatively (Turcan,
2012). This might make the company lose customers to competitors.
Technological advancement has offered an opportunity for rapid growth of
social network service companies such as Facebook. This is evidenced by
the historical path of growth and development of Facebook. Advancement
in mobile technology gave Facebook an opportunity to venture in mobile
advertisement. Despite the high competition posed to Facebook by
established network service companies, the effective management has
enabled the company to pursue its strategies. This has made Facebook one
of the leading social service companies. However, its narrow range of
services exposes it to business threats from competitors such as the
Google Corporation. However, the Facebook may overcome the challenge of
a narrow range of products if it successively pursues its strategy. The
strategy, which involves enhancement of search services and e-commerce
services, will increase its business opportunities and a competitive
advantage over competitors. Although the SWOT analysis indicates that
the North American market is almost saturated, Facebook has an
opportunity to expand its market in other parts of the world.
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