Facebook Business Strategy

Student’s Name

Institutional Affiliations

Table of Contents

Executive Summary 3

AFI Strategic Planning Framework 4

Role of Leadership in the Strategic Planning Process 5

Internal Environment Analysis 6

External Environment Analysis 6

Recommended Course of Action 7

References 8

Appendices 10

Appendix A: Facebook VRIO Analysis 10

Appendix B: Facebook PESTLE Analysis 12

Appendix C: Facebook Five Forces Analysis 14

Executive Summary

Facebook is one of the leading social media networks used by several people around the world. Technological advancements have helped Facebook to expand its market size and customer segments globally. While continuous technological advancements enable Facebook to constantly improve its features, repeated data breaches are attracting lawsuits that tend to damage the company’s reputation. The company needs a strategic plan that will enable it to achieve long-term success and competitive advantage. The AFI Strategic Planning Framework will help Facebook to formulate and implement strategies that consider factors within the company’s external and internal environments. Based on the internal and external analysis, it is recommended that Facebook develops and implements strategies that enhance customer retention, limit substitutes, and promote data safety.

Facebook Business Strategy

AFI Strategic Planning Framework

Organizations should develop clear strategies that will enable them to meet their goals, mission, and vision. Rothaermel (2021) defines strategy as an art and science that describe whether a company will succeed or fail. Effective strategic management entails the completion of important tasks to generate results and achieve a competitive advantage (Hamel & Prahalad, 2005). The AFI Strategic Planning Framework comprises three major components namely Analysis, Formulation, and Implementation which define the interdependent stages of strategic management in an organization. Applying these key components can help Facebook to achieve long-term success and sustained competitive advantage (Rothaermel, 2012). For instance, during the Analysis phase, Facebook leaders should understand the meaning of strategy, explain why it is important, describe the internal and external factors affecting the company’s performance, and identify sources of its competitive advantage. The leaders should then move to the Formulation phase where they develop the business-level, corporate-level, and global-level strategies for Facebook. Once these three levels of strategies have been formulated, Facebook leaders should proceed to strategy execution where they design an appropriate organizational structure, set control, and create policies that foster strong corporate governance and business ethics (Mahoney, 2018). Using the AFI Strategic Planning Framework will help Facebook to achieve long-term success and sustained competitive advantage in that it will enable the company to formulate and implement strategies that allow adequate utilization of its strengths to address its weaknesses, take advantage of existing opportunities, and mitigate potential threats. The AFI Strategic Planning Framework is shown in figure 1.

Figure 1. Rothaermel’s AFI Strategic Planning Framework

Role of Leadership in the Strategic Planning Process

The leadership of every organization plays an important role in the strategic planning process. For example, the leadership is charged with the responsibility of creating a vision and goals that offer the direction of focus when developing strategies (Rothaermel (2021). Using the strategic management stages identified in the AFI Strategy Framework, Facebook leadership plays a key role in ensuring that every phase is successfully executed. For example, the leadership sets the stage for strategic analysis. Additionally, it guides the development of business-level, corporate-level, and global-level strategies for the company (Jabbar & Alfartoosi, 2017). Most importantly, Facebook leadership ensures that relevant strategies are successfully implemented to help the company to realize long-term success and competitive advantage. The ethical responsibilities of leaders in the strategic planning process include adhering to relevant laws and involving stakeholders in the decision-making process.

Internal Environment Analysis

A company’s internal environment comprises factors that are viewed as its strengths and weaknesses. The VRIO or Value Chain Analysis entails an evaluation of factors within the value chain that help a company to achieve a competitive advantage (Grunig & Kuhn, 2018). It helps evaluators to establish whether a company’s resources are valuable, rare, inimitable, and organized. The key findings from the VRIO analysis indicate that the five key resources that drive competitive advantage at Facebook include strong global presence, financial strength, technological innovation, complementary product range, and brand awareness (Mazzucchelli et al., 2021; Coelho et al., 2014). Additionally, it is evident from the analysis that Facebook adequately leverages its strengths to execute its business strategy. For example, Facebook highly invests in digital advertising as well as research and development. This helps in to expand its brand awareness and innovate technological features which serve as its greatest sources of competitive advantage (Coelho et al., 2014). Facebook also has an effective organizational structure and management system design both of which help it to balance its key resources.

External Environment Analysis

Strategic planning and management should consider factors that present opportunities and impose threats to an organization. These factors form the external environment. The key findings from the PESTLE analysis revealed that Facebook is widely used to spread fake political news (Dudovskiy, 2017). Additionally, the company incurs huge expenses and costs associated with expansions, advertising, and high exchange rates. The company’s core value has changed from a social connection platform to a business platform where businesses meet customers. While continuous technological advancements enable Facebook to constantly improve its features, repeated data breaches are attracting lawsuits that tend to damage the company’s reputation. It is also evident that the company should replace its coal power generation source with renewable energy to curb climate change (Dudovskiy, 2017). Porter’s Five Forces analysis on Facebook revealed that the company has a moderate competitive rivalry, the bargaining power of buyers is high, the bargaining power of suppliers is moderate, the threat of substitutes is high, and the threat of new entrants is low (Young, 2018). Facebook can respond to these forces to better position itself by relying on the strengths that help it to achieve a competitive advantage.

Recommended Course of Action

The insights generated from internal and external analysis should be used to plan for the future direction of Facebook. The recommended course of action for the company’s leadership should focus on three main areas. First, in order to maintain Facebook’s core purpose of promoting social networking, the company’s leadership should develop and implement strategies that enhance customer satisfaction. This will enhance customer retention and support the achievement of competitive advantage (Amadeo, 2019). Second, Facebook should make its advertising services more attractive than those of its competitors to limit competition and reduce the degree of threat caused by substitutes. Third, the company should tighten user policies to control people’s behaviors on its platform, especially those policies that promote data safety and limit data breaches (Young, 2018). These recommendations will help Facebook to improve resources identified in the VRIO analysis while at the same time being able to control factors in its external environment thereby achieving long-term success and competitive advantage.

References

Amadeo, K. (2019). What is competitive advantage? Three strategies that work. https://www.thebalance.com/what-is-competitive-advantage-3-strategies-that-work-3305828

Coelho, J., Nobre, H., & Becker, K. (2014). The impact of Facebook presence on brand image. International Journal of Technology Marketing, 9(3):320 – 332. doi:10.1504/IJTMKT.2014.063859.

Dudovskiy, J. (2017). Facebook PESTEL analysis: Two-way relationships between external factors and social media giant. https://research-methodology.net/facebook-pestel-analysis-two-way-relationships-between-external-factors-and-social-media-giant/

Grunig, R. & Kuhn, R. (2018). The strategy planning process. Springer.

Hamel, G., & Prahalad, C. K. (2005). Strategic intent. Harvard Business Review, 83(7/8), 148–161.

Jabbar, A. A. & Alfartoosi, A. (2017). The role of leadership in strategic management. International Journal of Research, 5(99-106), 71-81. doi:10.5281/zenodo.583890

Mahoney, J. (2018). What is strategy. https://josephmahoney.web.illinois.edu/BA449_Fall_2018/BA449Chap001_Fall%202018.pdf

Mazzucchelli, A., Chierici, R., Di Gregorio, A., & Chiacchierini, C. (2021). Is Facebook an effective tool to access foreign markets? Evidence from international export performance of fashion firms. Journal of Management & Governance, 25, 1107–1144. https://doi.org/10.1007/s10997-021-09572-y

Rothaermel, F. (2012). Why do we need the AFI framework? Analysis, formulation, implementation [Video]. | Transcript. https://www.youtube.com/watch?v=nXOVGMVNZ7Y

Rothaermel, F. (2021). Strategic management (5th ed.). New York, NY: McGraw-Hill. Available in the courseroom via the VitalSource Bookshelf link.

Young, J. (2018). Facebook Inc. Five Forces Analysis (Porter’s Model) & recommendations. https://panmore.com/facebook-inc-five-forces-analysis-recommendations-porters-model

Appendices

Appendix A: Facebook VRIO Analysis

Facebook’s VRIO Analysis will cover the company’s strong global presence, financial strength, technological innovation, complementary product range, and brand awareness. The aim of the analysis is to evaluate whether Facebook will have a sustained competitive advantage.

Strong Global Presence: Facebook has a strong global presence supported by a large audience that is distributed throughout the world. Individuals and businesses extensively use the platform for networking, marketing, and product promotion. It will be difficult for competing organizations to outperform Facebook in the market since it is a brand that is well-recognized worldwide. Due to its global presence, Facebook generates substantially high revenue, a factor that will help it to continue enjoying a competitive advantage in the media industry.

Financial Strength: Facebook has a strong financial position. The company’s financial position as of June 2022 was 28.82 billion. The strong financial standing allows Facebook to spend heavily on marketing as well as research and development. Its substantial revenue comes from digital advertising done by billions of active users. The company’s strong financial position is a good source of competitive advantage.

Technological Innovation: Facebook depends heavily on technology to be able to reach its audience. In this regard, it spends heavily on technological research and development to identify innovations that can help it to maintain a competitive advantage. One of the reasons why Facebook has earned increasing revenue in the recent past is due to the innovative features on its platform that users get to enjoy. It is highly likely that the company will continue to maintain a competitive advantage in a market where close competitors still lag on issues related to technological innovation.

Complementary Product Range: Facebook offers a wide range of products through mergers and acquisitions with other brands. Although the company’s main source of revenue is digital advertising, it is also able to earn additional revenue from acquisitions with expanded products like WhatsApp and Instagram. As Facebook continues to grow in popularity through its expanded products, it will continue to have a sustained competitive advantage in the market compared with its close competitors like Twitter and LinkedIn.

Brand Awareness: Facebook takes pride in the high brand awareness among its users. It is committed to giving its users a unique experience through innovative features. The company attributes its increasing revenue and growth to high brand awareness among global users. The fact that Facebook invests heavily in marketing and advertising helps it to strengthen brand awareness and increase user engagement, a factor that will contribute to continued competitive advantage.

Resource Valuable Rare Inimitable Organized

Strong Global Presence Yes Yes No Yes

Financial Strength Yes Yes No Yes

Technological Innovation Yes Yes Yes Yes

Complementary Product Range Yes Yes No Yes

Brand Awareness Yes Yes Yes Yes

Appendix B: Facebook PESTLE Analysis

Political

• Widely used to share news about local and international politics

• Some users have made the platform a place for sharing ‘fake news’

• Countries like North Korea and China have restricted their citizens from accessing Facebook to control fights among political parties

• Facebook has enhanced political ties with many countries, and this has influenced people’s thoughts about politics and policies

Economic

• Facebook incurs huge expenses and costs associated with expansions, advertising, and high exchange rates

• The company contributes greatly to the growth of the global economy

• It is anticipated that Facebook with create employment for many people and increase revenue growth in the near future

• The company acts as a business platform where buyers meet sellers

Social

• The company’s core value has changed from a social connection platform to a business platform where businesses meet customers

• The information posted on Facebook lacks quality owing to the fact that users are worried about connecting to other websites that they do not trust

Technological

• Continuous technological advancements enable Facebook to constantly improve its features

• Facebook is more than a website as it also has a messenger application where users can interact

• Data safety is compromised due to data leaks and hacking attempts

• Expansions and acquisitions with other products such as Instagram creates platforms where users can connect with their friends and relatives

Legal

• Data breaches are attracting lawsuits which tend to damage Facebook’s reputation

• Facebook users frequently violate data privacy policies such as the European Union’s General Data Protection Regulation (GDPR)

Environmental/Ecological

• The carbon footprint generated from data centers causes some damage to the environment

• The company should replace its coal power generation source with renewable energy to curb climate change

Appendix C: Facebook Five Forces Analysis

Competitive Rivalry: Facebook is facing medium rivalry from its close competitors such as Twitter and LinkedIn. This is attributed to the small number of competing firms with less variated products.

Bargaining Power of Buyers: The bargaining power of buyers in the media industry is high. The reason is that there are substitutes that customers can consider characterized by low switching costs.

Bargaining Power of Suppliers: Facebook faces moderate force regarding the bargaining power of suppliers. This is attributed to the availability of many suppliers which are of moderate sizes.

The Threat of Substitution: There is a high threat of substitutes in the media industry where Facebook operates. This is attributed to low switching costs and the availability of almost similar products and services offered by its competitors.

The Threat of New Entrants: The threat of new entrants is low. This is caused by the high costs associated with brand development. Additionally, the cost of customer loyalty is high and switching costs are low.

Facebook Business Strategy

Student’s Name

Institutional Affiliations

Table of Contents

Executive Summary 3

AFI Strategic Planning Framework 4

Role of Leadership in the Strategic Planning Process 5

Internal Environment Analysis 6

External Environment Analysis 6

Recommended Course of Action 7

References 8

Appendices 10

Appendix A: Facebook VRIO Analysis 10

Appendix B: Facebook PESTLE Analysis 12

Appendix C: Facebook Five Forces Analysis 14

Executive Summary

Facebook is one of the leading social media networks used by several people around the world. Technological advancements have helped Facebook to expand its market size and customer segments globally. While continuous technological advancements enable Facebook to constantly improve its features, repeated data breaches are attracting lawsuits that tend to damage the company’s reputation. The company needs a strategic plan that will enable it to achieve long-term success and competitive advantage. The AFI Strategic Planning Framework will help Facebook to formulate and implement strategies that consider factors within the company’s external and internal environments. Based on the internal and external analysis, it is recommended that Facebook develops and implements strategies that enhance customer retention, limit substitutes, and promote data safety.

Facebook Business Strategy

AFI Strategic Planning Framework

Organizations should develop clear strategies that will enable them to meet their goals, mission, and vision. Rothaermel (2021) defines strategy as an art and science that describe whether a company will succeed or fail. Effective strategic management entails the completion of important tasks to generate results and achieve a competitive advantage (Hamel & Prahalad, 2005). The AFI Strategic Planning Framework comprises three major components namely Analysis, Formulation, and Implementation which define the interdependent stages of strategic management in an organization. Applying these key components can help Facebook to achieve long-term success and sustained competitive advantage (Rothaermel, 2012). For instance, during the Analysis phase, Facebook leaders should understand the meaning of strategy, explain why it is important, describe the internal and external factors affecting the company’s performance, and identify sources of its competitive advantage. The leaders should then move to the Formulation phase where they develop the business-level, corporate-level, and global-level strategies for Facebook. Once these three levels of strategies have been formulated, Facebook leaders should proceed to strategy execution where they design an appropriate organizational structure, set control, and create policies that foster strong corporate governance and business ethics (Mahoney, 2018). Using the AFI Strategic Planning Framework will help Facebook to achieve long-term success and sustained competitive advantage in that it will enable the company to formulate and implement strategies that allow adequate utilization of its strengths to address its weaknesses, take advantage of existing opportunities, and mitigate potential threats. The AFI Strategic Planning Framework is shown in figure 1.

Figure 1. Rothaermel’s AFI Strategic Planning Framework

Role of Leadership in the Strategic Planning Process

The leadership of every organization plays an important role in the strategic planning process. For example, the leadership is charged with the responsibility of creating a vision and goals that offer the direction of focus when developing strategies (Rothaermel (2021). Using the strategic management stages identified in the AFI Strategy Framework, Facebook leadership plays a key role in ensuring that every phase is successfully executed. For example, the leadership sets the stage for strategic analysis. Additionally, it guides the development of business-level, corporate-level, and global-level strategies for the company (Jabbar & Alfartoosi, 2017). Most importantly, Facebook leadership ensures that relevant strategies are successfully implemented to help the company to realize long-term success and competitive advantage. The ethical responsibilities of leaders in the strategic planning process include adhering to relevant laws and involving stakeholders in the decision-making process.

Internal Environment Analysis

A company’s internal environment comprises factors that are viewed as its strengths and weaknesses. The VRIO or Value Chain Analysis entails an evaluation of factors within the value chain that help a company to achieve a competitive advantage (Grunig & Kuhn, 2018). It helps evaluators to establish whether a company’s resources are valuable, rare, inimitable, and organized. The key findings from the VRIO analysis indicate that the five key resources that drive competitive advantage at Facebook include strong global presence, financial strength, technological innovation, complementary product range, and brand awareness (Mazzucchelli et al., 2021; Coelho et al., 2014). Additionally, it is evident from the analysis that Facebook adequately leverages its strengths to execute its business strategy. For example, Facebook highly invests in digital advertising as well as research and development. This helps in to expand its brand awareness and innovate technological features which serve as its greatest sources of competitive advantage (Coelho et al., 2014). Facebook also has an effective organizational structure and management system design both of which help it to balance its key resources.

External Environment Analysis

Strategic planning and management should consider factors that present opportunities and impose threats to an organization. These factors form the external environment. The key findings from the PESTLE analysis revealed that Facebook is widely used to spread fake political news (Dudovskiy, 2017). Additionally, the company incurs huge expenses and costs associated with expansions, advertising, and high exchange rates. The company’s core value has changed from a social connection platform to a business platform where businesses meet customers. While continuous technological advancements enable Facebook to constantly improve its features, repeated data breaches are attracting lawsuits that tend to damage the company’s reputation. It is also evident that the company should replace its coal power generation source with renewable energy to curb climate change (Dudovskiy, 2017). Porter’s Five Forces analysis on Facebook revealed that the company has a moderate competitive rivalry, the bargaining power of buyers is high, the bargaining power of suppliers is moderate, the threat of substitutes is high, and the threat of new entrants is low (Young, 2018). Facebook can respond to these forces to better position itself by relying on the strengths that help it to achieve a competitive advantage.

Recommended Course of Action

The insights generated from internal and external analysis should be used to plan for the future direction of Facebook. The recommended course of action for the company’s leadership should focus on three main areas. First, in order to maintain Facebook’s core purpose of promoting social networking, the company’s leadership should develop and implement strategies that enhance customer satisfaction. This will enhance customer retention and support the achievement of competitive advantage (Amadeo, 2019). Second, Facebook should make its advertising services more attractive than those of its competitors to limit competition and reduce the degree of threat caused by substitutes. Third, the company should tighten user policies to control people’s behaviors on its platform, especially those policies that promote data safety and limit data breaches (Young, 2018). These recommendations will help Facebook to improve resources identified in the VRIO analysis while at the same time being able to control factors in its external environment thereby achieving long-term success and competitive advantage.

References

Amadeo, K. (2019). What is competitive advantage? Three strategies that work. https://www.thebalance.com/what-is-competitive-advantage-3-strategies-that-work-3305828

Coelho, J., Nobre, H., & Becker, K. (2014). The impact of Facebook presence on brand image. International Journal of Technology Marketing, 9(3):320 – 332. doi:10.1504/IJTMKT.2014.063859.

Dudovskiy, J. (2017). Facebook PESTEL analysis: Two-way relationships between external factors and social media giant. https://research-methodology.net/facebook-pestel-analysis-two-way-relationships-between-external-factors-and-social-media-giant/

Grunig, R. & Kuhn, R. (2018). The strategy planning process. Springer.

Hamel, G., & Prahalad, C. K. (2005). Strategic intent. Harvard Business Review, 83(7/8), 148–161.

Jabbar, A. A. & Alfartoosi, A. (2017). The role of leadership in strategic management. International Journal of Research, 5(99-106), 71-81. doi:10.5281/zenodo.583890

Mahoney, J. (2018). What is strategy. https://josephmahoney.web.illinois.edu/BA449_Fall_2018/BA449Chap001_Fall%202018.pdf

Mazzucchelli, A., Chierici, R., Di Gregorio, A., & Chiacchierini, C. (2021). Is Facebook an effective tool to access foreign markets? Evidence from international export performance of fashion firms. Journal of Management & Governance, 25, 1107–1144. https://doi.org/10.1007/s10997-021-09572-y

Rothaermel, F. (2012). Why do we need the AFI framework? Analysis, formulation, implementation [Video]. | Transcript. https://www.youtube.com/watch?v=nXOVGMVNZ7Y

Rothaermel, F. (2021). Strategic management (5th ed.). New York, NY: McGraw-Hill. Available in the courseroom via the VitalSource Bookshelf link.

Young, J. (2018). Facebook Inc. Five Forces Analysis (Porter’s Model) & recommendations. https://panmore.com/facebook-inc-five-forces-analysis-recommendations-porters-model

Appendices

Appendix A: Facebook VRIO Analysis

Facebook’s VRIO Analysis will cover the company’s strong global presence, financial strength, technological innovation, complementary product range, and brand awareness. The aim of the analysis is to evaluate whether Facebook will have a sustained competitive advantage.

Strong Global Presence: Facebook has a strong global presence supported by a large audience that is distributed throughout the world. Individuals and businesses extensively use the platform for networking, marketing, and product promotion. It will be difficult for competing organizations to outperform Facebook in the market since it is a brand that is well-recognized worldwide. Due to its global presence, Facebook generates substantially high revenue, a factor that will help it to continue enjoying a competitive advantage in the media industry.

Financial Strength: Facebook has a strong financial position. The company’s financial position as of June 2022 was 28.82 billion. The strong financial standing allows Facebook to spend heavily on marketing as well as research and development. Its substantial revenue comes from digital advertising done by billions of active users. The company’s strong financial position is a good source of competitive advantage.

Technological Innovation: Facebook depends heavily on technology to be able to reach its audience. In this regard, it spends heavily on technological research and development to identify innovations that can help it to maintain a competitive advantage. One of the reasons why Facebook has earned increasing revenue in the recent past is due to the innovative features on its platform that users get to enjoy. It is highly likely that the company will continue to maintain a competitive advantage in a market where close competitors still lag on issues related to technological innovation.

Complementary Product Range: Facebook offers a wide range of products through mergers and acquisitions with other brands. Although the company’s main source of revenue is digital advertising, it is also able to earn additional revenue from acquisitions with expanded products like WhatsApp and Instagram. As Facebook continues to grow in popularity through its expanded products, it will continue to have a sustained competitive advantage in the market compared with its close competitors like Twitter and LinkedIn.

Brand Awareness: Facebook takes pride in the high brand awareness among its users. It is committed to giving its users a unique experience through innovative features. The company attributes its increasing revenue and growth to high brand awareness among global users. The fact that Facebook invests heavily in marketing and advertising helps it to strengthen brand awareness and increase user engagement, a factor that will contribute to continued competitive advantage.

Resource Valuable Rare Inimitable Organized

Strong Global Presence Yes Yes No Yes

Financial Strength Yes Yes No Yes

Technological Innovation Yes Yes Yes Yes

Complementary Product Range Yes Yes No Yes

Brand Awareness Yes Yes Yes Yes

Appendix B: Facebook PESTLE Analysis

Political

• Widely used to share news about local and international politics

• Some users have made the platform a place for sharing ‘fake news’

• Countries like North Korea and China have restricted their citizens from accessing Facebook to control fights among political parties

• Facebook has enhanced political ties with many countries, and this has influenced people’s thoughts about politics and policies

Economic

• Facebook incurs huge expenses and costs associated with expansions, advertising, and high exchange rates

• The company contributes greatly to the growth of the global economy

• It is anticipated that Facebook with create employment for many people and increase revenue growth in the near future

• The company acts as a business platform where buyers meet sellers

Social

• The company’s core value has changed from a social connection platform to a business platform where businesses meet customers

• The information posted on Facebook lacks quality owing to the fact that users are worried about connecting to other websites that they do not trust

Technological

• Continuous technological advancements enable Facebook to constantly improve its features

• Facebook is more than a website as it also has a messenger application where users can interact

• Data safety is compromised due to data leaks and hacking attempts

• Expansions and acquisitions with other products such as Instagram creates platforms where users can connect with their friends and relatives

Legal

• Data breaches are attracting lawsuits which tend to damage Facebook’s reputation

• Facebook users frequently violate data privacy policies such as the European Union’s General Data Protection Regulation (GDPR)

Environmental/Ecological

• The carbon footprint generated from data centers causes some damage to the environment

• The company should replace its coal power generation source with renewable energy to curb climate change

Appendix C: Facebook Five Forces Analysis

Competitive Rivalry: Facebook is facing medium rivalry from its close competitors such as Twitter and LinkedIn. This is attributed to the small number of competing firms with less variated products.

Bargaining Power of Buyers: The bargaining power of buyers in the media industry is high. The reason is that there are substitutes that customers can consider characterized by low switching costs.

Bargaining Power of Suppliers: Facebook faces moderate force regarding the bargaining power of suppliers. This is attributed to the availability of many suppliers which are of moderate sizes.

The Threat of Substitution: There is a high threat of substitutes in the media industry where Facebook operates. This is attributed to low switching costs and the availability of almost similar products and services offered by its competitors.

The Threat of New Entrants: The threat of new entrants is low. This is caused by the high costs associated with brand development. Additionally, the cost of customer loyalty is high and switching costs are low.