Facebook Analysis To Confirm Its Competitiveness In A Defined Market - Essay Example

? Facebook analysis to confirm its competitiveness in a defined market Contents Contents 2 Creation of Facebook 4 Biography of the Founder 5 Mission of the Company 6 Values of the Company 6 Organizational Structure of Facebook 7 Legal Structure of Facebook 9 Market Positioning Strategy of Facebook 10 Competitive Advantages of Facebook 12 Political Impact of Facebook 12 Economic Impact of Facebook 12 Social Impact of Facebook 14 Technological Impact of Facebook 15 Environmental Impact of Facebook 15 Legal Environment of Facebook 15 Strategies of Facebook to Persuade Customers 15 Portfolio of Activities of Facebook 17 Corporate Governance Structure of Facebook 17 Financial Position of Facebook 18 Demand and Supply Analysis of Facebook 20 References 22 Creation of Facebook Facebook accounts for being one of the most famous social networking sites in the world. Launched in the year 2004, it is completely owned and operated by Facebook Inc. Formally created and initiated as a hobby project by a student of Harvard University called Mark Zuckerberg, it soon spread across the entire university. The idea was to create a website though which people in the university could stay connected with each and share ideas. Within months of its initiation the core idea spread beyond the boundary rooms of Harvard and was highly appreciated and accepted by all. Very soon it got extended to Yale and Stanford and was endorsed widely in these places. The initiative was accompanied and followed by two more students at Harvard, Chris Hughes and Dustin Moskovitz who helped the founder to grow and take the concept to the next level. Within a matter of few months, it became a national student network. In 2005, it was officially given the name of Facebook. The domain was called facebook.com was purchased at a rate of $200,000. Facebook was then opened in 2006 and could be accessed by everyone above 13 years of age having a valid e-mail identity. In 2008, it was announced that Facebook would set up international headquarters in Dublin, Ireland. In 2010, the company began to invite users to go through a beta test or selection process based on questions and answers. A number of engineering puzzles were given to them where these users were required to solve computational problems. This gave them opportunities to get hired in Facebook. It had emerged as the greatest only photo host by 2011 and had millions of users accessing the same from mobile phones, which accounted for 33% of the entire traffic in Facebook (Carlson, “At Last -- The Full Story Of How Facebook Was Founded”). Biography of the Founder Originally known as the Facebook, the site was founded by Mark Zuckerberg, a former student at Harvard University. After completing second year at the university, he left it to concentrate on the website he had created and which had a use based of more than 250 million people. Born in May 14, 1984, in New York, Zuckerberg had grown in a well educated and comfortable family. Zuckerberg’s interest in computers and technology showed very early in his childhood. He had created messaging program using Atari Basic, at the age of 12 which he named as Zucknet. His father use to use this program for running operations at his dental office. The receptionist at office could use this program to convey the message of a new patient arrival without screaming across the room. This program was also used within the family to communicate in the house. He took interest in computer games with his friends just for fun (Chittaranjan Wordpress, “Early life”). In order to entertain and encourage his interest in computers, Mark’s parents arranged for a private computer tutor at home, who had later on declared to reporters that he found to difficult to stay ahead of a prodigy who was interested more in the graduate courses at the nearby college. Beside computers, Lark also showed immense talent in fencing and soon became captain of his school team. One of his other interests was literature, in which he earned a diploma in classics. However, his fascination for computers persisted and continued and he continued working on creating new and innovative programs. Companies like Microsoft and AOL wanted to hire him before completion of graduate degree but he declined these offers. He was enrolled in Harvard University in 2002 and had created programs called CourseMatch and Facemash. Facebook, among all such programs had gained the maximum popularity and could not be restricted within the doors of Harvard. He dropped out of college to pursue the program full time and by the end of the year 2004, Facebook had more than one million users (Chittaranjan Wordpress, “Early life”). Mission of the Company Mission of the company is to give its people or users the complete power to share and generate openness in the world and enhance connectivity. However, the mission of the company during its initiation was different. In 2004 it only acted as an online directory which served to connect people across the world through social network at colleges. Later on this was also changed. In 2007, Facebook served as a social utility allowing people to communicate with friends, family and coworkers with ease and efficiency. The company continued its initiatives to generate and develop technologies which facilitate information sharing through the social graphs which are the digital mapping of real life connections of individual’s. In 2009 the mission was changed to help people share and connect with people in their lives. The mission statements and its transformation over the years show that the organization is becoming more and more ambitious with time. This gets reflected through its attempt to serve as a simple network through which people could connect with friends to a utility to create more openness and connectedness in the world. The company was confronted with a lot of legal issues regarding privacy of individuals; however, it has not made him relent from its path. It seeks to create openness and connectedness among individuals. By doing this Zuckerberg, along with his team was able to succeed to become the central point of connection in the world (Parr, “Facebook’s Ultimate Mission”). Values of the Company While connecting millions of users across the globe Facebook has been effective in generating more transparency, visibility and openness among its users. However, true value of the company lies in the facts that that it seeks to maintain respect and esteem for people. This is demonstrated by the fact that it retains the rights to delete harassing, disrespectful, profane, and abusive and spam comments posted by users on the site. It also allows users the right and retains its own rights to block repeat offenders from the site. In other words it prohibits users to take advantage of exploit the openness and transparency created through the medium. Though it has emerged as a huge success as a business, it seeks to maintain and abide by ethical issues by preserving the rights and privileges of individuals. Organizational Structure of Facebook The organizational structure of company typically illustrates the relations existing between people within the organization. This includes all managers, coworkers, directors, managing directors, and chief executive officers in different departments. The organizational structure of Facebook reflects a typical matrix structure which is a combination of fully matrix and functional structures. Following is the organizational structure of Facebook. Figure 1: Facebook- Organizatonal Structure (Source: The Official Board, “Facebook”) The above organizational chart of Facebook reveals that project teams are represented as functional units based on their respective functions. Here people having similar skills are grouped or pooled for similar work assignments. Such all engineers have the same skills are grouped together in one engineering departments and they all report to the same engineering manager. However, the same engineers can be allocated or assigned different projects to work on. They might be also required to report to different engineering managers while working in those projects. Therefore it is possible that the same engineer is working under different managers in order to get the work done. In the above chart some of the departments according to which employees have been grouped are human resource, technical operations, engineering, global marketing, treasurer, product management, corporate development etc. The advantage of such a structure is that it allows members to share all information across the task boundaries. It also provides and allows greater specialization which increases the depth of knowledge of the subject for members in the hierarchy. This helps to facilitate career progression of employees up the organizational hierarchy and better management of their careers. Also professional development of individuals can be managed more easily and efficiently through this system (Facebook, “The matrix”). Legal Structure of Facebook Facebook particularly tries to abide by the advertising guidelines and facebook platform policies. It takes absolute accountability and responsibility of its programs and content. For example platform developers and applications are subject to and must comply with the Statement of Rights and Responsibilities, Principles and Policies. It complies with all the applicable laws and regulations. For example is allows users to remove infringing contents, and also terminate repeat infringers. This complies with the Digital Millennium Copyright Act. It also complies with (VPPA), or the Video Privacy Protection Act. Under this it attains an option to attain consent from users to allow sharing of the data across friends in the network. The user is asked for his or her consent if the data which is subject to VPPA can be shared across facebook. The privacy settings are particularly helpful for maintaining privacy and space of every individual in the network. It is up to the will of the individual whether he wants to share his personal information or not, and if yes, then with whom. It allows users to select friends across his network and customize information to be shared. It also follows the payments terms while taking payments from users. The amount is calculated as per their tracking mechanisms. It specially abides by the advertising guidelines such that advertisers on the network are not exploited or subject to harassments (Facebook-a, “Facebook Platform Policies”). The organization retains enforcement actions against users and applications if they are found to be violating Facebook Platform Terms and policies. These enforcement actions can be both automated as well as manual. This can include disabling applications, restricting application access, terminating agreements with users, or other suitable actions as it deems fit for the situation (Facebook-a, “Facebook Platform Policies”). Market Positioning Strategy of Facebook The market positioning strategy of Facebook can be explained using the BCG matrix. The BCG matrix is shown in the following figure. Figure 2: BCG Matrix (Source: Griffin, p.255) According to the Boston Consulting Group (BCG) matrix, Facebook can be said to be in the position of stars. This is it captures a large share of the market which is also rising dramatically in the global front. Stars are businesses which have the largest share of the market which has been growing rapidly. It is safe to make big investments in stars as it has maximum changes of growth and profitability in business. The company primarily positions itself for college students and the young generation aged between 13 and 35 years of age. Therefore its brand marketing and brand creating strategies are also aimed towards targeting this generation. It provides numerous games and applications which are popular amongst the young generation. Moreover, the need for interconnectedness, friendship and networking is also seen to be popular among people in this age group. Thus such applications as sharing birthdays or other events are mainly attributed towards targeting this age group. The generation is also found to be characterized by inquisitiveness, questioning and curiosity. Therefore such aspects as photo uploading and sharing and providing a platform for posting comments on such information are highly appreciated and accepted among the young crowd. Besides curiosity, the young people are also found to enjoy comments and be appreciated and identified. Besides interconnectedness Facebook allows these people to get positive comments and be appreciated by friends, families and relatives. The generation also tries to be informative and gain as much information of the world as they can. Including news articles helps them to gain and exchange information of the world. These strategies account for some of the main positional strategies for Facebook (Griffin, p.255). Competitive Advantages of Facebook The competitive advantages that Facebook gains in the international social networking market can be reflected from the analysis conducted based on the PESTEL Model that tends to conduct a holistic analysis based on several factors. Political Impact of Facebook Several political factions pertaining to different regions tend to gain the views of general public through the creation of online networking pages through the use of social media sites like Facebook. In times of poll the Facebook happens to act as instrument of the political parties to draw the views of the people for gaining votes (Schmidt, Shelley and Bardes 117). Economic Impact of Facebook Facebook is observed to render considerable amount of economic impact both at the direct and indirect level on individuals and groups-business and non-business centered. The social networking tool helps in attracting large number of users to participate in a voluntary economic activity to help in drawing large amount of revenues. Again through the use of Facebook several companies tend to effectively sponsor their brand image and also the image pertaining to their products and services in the pages created. In return Facebook gains revenues from such companies wherein the companies also tend to gain immensely out of the enhancement of public awareness. The social networking company also gains through the conducting of sales pertaining to the dimension of technology and internet related services. Through such activity the demand for technology and broadband related services also tends to increase in an enhanced manner in the different regions. Moreover the company also creates a large number of applications and events to attract the user groups thereby enhancing the revenue paradigm. The company in the light of gaining such enhanced revenue focuses on rendering adequate and equitable compensation to the employees in the concern and also works to expand its operations through permeating new territories and sectors. Thus the economic environment of the company constitutes of the different allied companies that tend to expand their business operations with the cooperation of Facebook. The diagram below would reflect on the different direct and indirect economic activities performed by Facebook in the course of its business operations (Deloitte, “Measuring Facebook’s economic impact on Europe” 3-4). Figure 3 (Deloitte, “Measuring Facebook’s economic impact on Europe” 4) Social Impact of Facebook Facebook in a very short period gained a large amount of public recognition in that the company that first started to work on a network of students gained large scale acceptance among other people other than the student groups in building networks. The large scale recognition of Facebook can be noticed in that the user groups climbed from 80 million to 100 million people within a span of two years ranging from 2008 to 2010. Facebook tends to share a dominating position in the sphere of social networking activities carried out by both individuals and other social or economic groups and thereby impacts the views and ideologies of the emerging and broader society (Shearn 57). Technological Impact of Facebook In regards to technological advantages Facebook is found to have gained the support of the highly popular global search engine, Google in helping its user base to extend their social networks. Facebook in that gains access to Google through a technological interface that in turn helps its users to invite people from Gmail to be friends in their social network sites (Bailyn). Environmental Impact of Facebook Social networking sites like Facebook help in gaining a large amount of public opinion in regards to the activities of non-profitable organizations aimed at saving the natural environment. Through the help of Facebook these organizations aim at drawing large amount of funds for the cause of saving the natural environment (Pride and Ferrell 21). Legal Environment of Facebook The firms operating in the United States market get a distinct advantage of being able to acquire other small firms operating in the same market to thereby gain a competitive business position. Facebook also gains the distinct advantage of this by making around 11 acquisitions from 2007 thus focusing on expanding its operations. Working on the acquisition framework the company recently gained hold of a software application firm, Snaptu to gain further productivity in its service structure (Hitt, Ireland and Hoskisson 194). Strategies of Facebook to Persuade Customers Facebook is found to take resort to a differentiated strategy in order to attract potential consumers. The social networking site works to encourage consumers in helping it to earn revenues from the larger society. The strategy employed by Facebook helped the company in gaining a large number of friends of the order of around 500 million that in turn helped the company to gain revenues of around $800 million. It is learnt that the strategy put to use by Facebook is known as the ‘Popular Nation’ strategy in which the customers pertaining to a business are in turn taken as passive participants to the company’s revenue earning process. This strategy enabled the firm to gain the interests of large number of viewers and consumer groups that voluntarily gained membership of the social networking site and thereby helped the company in gaining profits and revenues. The ‘Popular Nation’ strategy used by Facebook can be seen as a holistic strategy that focuses on the ideology of gaining business from fiends, viewers and consumers (Libert 190). The strategy can be depicted through the use of the following diagram. Figure 4 (Libert 189) Portfolio of Activities of Facebook Facebook as a social networking site conducts a plethora of activities to serve its consumers and viewers. Facebook is regarded as the nerve center of the different types of social networking operations that are desired to be carried out by both individuals and business or other non-business groups. The different parties to the social networking operations through the use of Facebook can work for the posting of photographs, videos, and different updates relating to the internal and external issues. Similarly the parties through the use of Facebook can also go for creating pages for inviting discussions and debates pertaining to ongoing events and also can focus on getting recommendations to help modify the communicative and interactive sphere. Further, Facebook also provides a large amount of help in the designing of blogs and forums wherein the business and non-business houses can invite people to render articles reflecting their views. Equivalently the social networking site also helps the different parties to form personal web pages to help in the conduct of advertising and promotional activities to gain an enhanced public image. Facebook thereby acts as one stop channel for different communication activities that are taken to be performed by individuals or groups to engage large number of viewers and customers. Through the use of Facebook the users can gain a network of views rendered by different parties and thereby helps the companies gain an enhanced knowledge about customer insights pertaining to different regions. In that it helps the companies enhance their customer servicing functions to help serve the consumers in a more productive fashion (O’Leary, Sheehan, and Lentz 44-46). Corporate Governance Structure of Facebook In regards to the corporate governance structure of Facebook it is found that the Chief Executive Officer and Founder of the company, Mark Zuckerberg holds around 28.2 percent of the shares of the company. He has the power to control the different operations of the company as well as choosing his own successor after his demise or declining to hold his existing position in the concern. Further the board of directors in the organization tends to hold independent rights in choosing their nominees thereby restricting the requirement of a nomination committee in the concern. Thus the designated members of the board gain exclusive rights to choose their own successors thereby enhancing the leadership position of Mark Zuckerberg in the organization. Further the governance structure of Facebook in addition to granting independent voting rights to the members of the board also moves to create a position to counter the activity pertaining to acquisitions. The corporate governance structure of Facebook in that enhances the position of those groups of shareholders that includes the founder along with previous employee groups of the concern. These groups of people having the maximum of voting rights in regards to the concern failing to which the members of the board gains the active right in rendering the votes. The Chief Executive Officer of the company gains special rights in convening the meeting of the shareholders. Thereby any change planned to be rendered in regards to the constitution of the shareholders needs to get approved from Mark Zuckerberg’s end. This reflects a network of dominion between the founder member and the previous employee groups in the concern. These shareholder groups gain exclusive rights to take actions and decisions in regards to the meetings convened by the Chief Executive Officer for the shareholders (Johansmeyer, “Facebook: Corporate Governance Minefield”). Financial Position of Facebook The financial position of Facebook pertaining to the 2009 period reflects a positive growth against the 2008 period where the organization tended to gain total revenue of $635 million against around $300 million revenue pertaining to the 2008 period. It is held that the company tends to gain around $150 million in regards to its revenue gains in the 2009 period against the 2008 period. Breakup of the revenue pertaining to the 2009 period reflects that the organization tends to gain revenue from a myriad number of sources mostly pertaining to the realm of advertising. Thus advertising activities constitute the major revenue generators for Facebook. The following chart reflects the breakup of the total revenue gained by the company during the 2009 period. Figure 5 (Eldon, “Facebook Revenues Up to $700 Million in 2009, On Track Towards $1.1 Billion in 2010”) The above chart can be represented in the form of a graphical representation as follows. The first category focuses on the internal branding actions of the company that mainly constitutes the upgrading activities pertaining to the web pages to hosts advertisements pertaining to different companies. In that Facebook aims to make a tie up with several companies to advertise their products and services through their web page and thereby gain considerable amount of revenue. The second category relates to the investment rendered by Microsoft in regards to carrying out advertising activities pertaining to the category of brand advertisements. Finally the fourth category relates to the advertising revenues gained by the company in regards to the performances or gaming activities conducted under its banner like the FarmVille Zynga. All such categories largely contribute in the gaining of revenues by Facebook on a year on year basis (Eldon, “Facebook Revenues Up to $700 Million in 2009, On Track Towards $1.1 Billion in 2010”). The company to sustain the growth in the revenue column focused on expending largely to develop on its technological and storage functions and also in regards to the enhancement of internet domain. Facebook goes on focusing to enhance its revenue paradigm in the coming years (Bloomberg Business Week, “Facebook Is Hunting for More Money”). Demand and Supply Analysis of Facebook Facebook faces continuous demand from individual entities as well as from business and social organizations requiring gaining a more publicize image in the world. Global and multinational corporations tend to express and enhance their marketing image through the use of social networking sites like Facebook. It is observed that corporations like Coca Cola tends to create a continuous demand for Facebook in its endeavor to publish both marketing and company information through the help of its page created in Facebook (Gusev and Mitrevski 168). Demand for Facebook largely increases owing to its enhanced interrelatedness with several internet based tools and connectivity profiles. Individuals tend to not only build social networks but also conduct posting of their views through blogs and articles in relation to national and international events. The propensity of internet usage by the user groups in regards to Facebook happens to reduce the complexity of usage of internet based applications. It is for this that social networking activities pertaining to Facebook acts as an ‘internet killer’ medium (Lehnert 125). Further the social networking site, Facebook reflects a monopoly market in the market pertaining to social networking activities in the global arena. This monopoly or single-handedness of Facebook in regards to the social networking activities happens to help the users depend on a particular social networking site for their conducts. Monopoly market situation for Facebook gets enhanced owing to the growth of large number of user groups and its gaining in dominance in regards to the parameters of technology, reliability and fastness. These parameters tend to sustain the level of attraction of the different user groups pertaining to both individuals and groups to the social networking site (Baumol and Blinder 223). References Bailyn, Evan. Outsmarting Social Media: Profiting in the Age of Friendship Marketing. Indiana: Que Publishing, 2012. Baumol, William J., and Blinder, Alan S. Microeconomics: Principles & Policy. United States: Cengage Learning, 2011. 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