Strategic management approaches in Facebook's organizational strategy

¶ … Environmental Analysis

Technical trends

At the current time there are many different trends in the field of social networking technology. One of the most popular trends is associated with technologies that allow users access to various social networking websites instantaneously through portable devices. This means that when someone is looking at a Face book page, send twitter messages, get music and watch YouTube. This technology is currently available via cell phones, the iPad and other portable devices. Now more than ever people have greater access to one another through social networking sites and the technology that has been created to support their use.

One of the major trends is the use of different apps or applications to carry out specific task. These apps can be downloaded for a fee and many apps are also free. These apps allow people to do everything from receiving important new update to turning on their lights before they get home. Overall these apps are designed to make peoples live simpler and they are being used as high rates.

Another major trend is voice over internet protocol (VOIP). Although this technology has been in existence for quite some time, the popularity of the service has increased because the technology allows people to make phone calls using their internet connections. This has transformed the way people perceive telephone service. Instead of paying a monthly bill this technology allows people to pay a specific amount per year that is much less than telephone service. In the years to come it is quite possible that this type of telephone service will have a negative effect on conventional telephone companies.

Personal media is also a popular trend within the realm of technology. The concept of personal media allows users to upload pictures, video and audio. All of these capabilities enhance the manner in which technology can be utilized and how people interact with one another via technology.

Demographic Trends

The population is growing in diversity and changes in this area of the population will likely continue well into the future. In fact experts have predicted that by the year 2050 White people will become the minority. The following graph depicts the demographic trends related to race in America.

According to the Pew Research Center there are many other demographic trends taking place. For instance the center explains that there has been an increase in the return of multigenerational households. The center also explains that

"The multi-generational American family household is staging a comeback -- driven in part by the job losses and home foreclosures of recent years, but more so by demographic changes that have been gathering steam for decades. As of 2008, a record 49 million Americans, or 16.1% of the total U.S. population, lived in such a household, up from 28 million, or 12.l% in 1980. Such households had been more common a century ago, but began to fall out of favor after World War II. Now they are coming back (the Pew Research Center)."

The research center also explains that the Millennials, people in their teens and twenties are a dynamic part of the current American demographic. These individuals are becoming adults and as such they are on the verge of entering the workforce and becoming productive members of society with incomes. The article describes people in this age group as "confident, self-expressive, liberal, upbeat and receptive to new ideas and ways of living. The article also explains that millennials are "more ethnically and racially diverse than older adults. The Great Recession has set back their entry into the labor force, but they are more upbeat than their elders about their own economic futures and the overall state of the nation. And they are the first "always connected" generation, steeped in digital technology and social media (Millennials: Confident. Connected. Open to Change, 2010)."

Much of the baby boom generation has reached retirement age but is still active. Many have been forced to get part time jobs because of the condition of the economy and increases in certain costs associated with living expenses. Many in this generation are now grandparents and many also have a great deal of disposable income.

Economic Trends

At the current time the economy in many different places in the world are in recession and some are recovering from recession. Unemployment is a major issue in the United States . According to the U.S. Bureau of Labor Statistics the unemployment rate is currently 9.3% (How the Government Measures Unemployment). Over the past two years the unemployment rate has reached record high as a result of the recession.

Various states throughout the country are being faced with budget deficits as a result of the collapse of the housing market, high unemployment and the overall state of the economy. Many states have been forced to cut many state sponsored programs. At the current time inflation rates are relatively low at 2.0%. The following graph depicts the changes in inflation rates over the past decade.

The current state of the economy has drastically increased the number of people enrolling in undergraduate and graduate programs. At times of recession people often feel that obtaining more education will be beneficial and increase the likelihood that they can find employment once the economy begins to recover.

Although there are economic problems on a global scale, these issues seem to have little to no effect on the use of social networking sites. In fact people seem to use these sites more as they are able to keep in touch with family members and friends that live in other areas of the country or of the world. These sites provide people with a free way of communicating with loved ones. Additionally these sites generate so much traffic that the companies make a great deal of money from advertisements.

Political and Legal Trends

In recent years there has been a great deal of concern about laws related to internet users. This concern has heightened in recent months as a number of young people have committed suicide as a result of cyber bullying. Cyber bullying can occur through instant messaging programs and social networking sites. People can send intimidating messages to one another electronically. In some jurisdictions laws have been established to address this issue. However in other jurisdictions the issue of cyber bullying has not been addressed through current laws. Much of the difficulty in establishing such laws is associated with the fact that technology grew at a much faster rate than did legal parameter to govern new technologies. As a result there has been a concerted effort to ensure that laws protect internet users.

There have also been many legal issues related to peer exchanges of music and movies which violates copyright laws. Over the past few years individual users have been sued for downloading music and movies from the internet through peer-to-peer services. Most recently a peer-to-peer service known as Limewire was given a $1 billion fine for providing the technology that allows for the peer-to-peer downloading of music that has not been paid for. The recording industry was able to get the judgment because the company violated copyright laws. Copyright violation and the manner in which the internet has affected the recording industry can be seen in the rapid and substantial decrease in the amount of music that is sold. Instead of purchasing CDs or even downloads, people have used peer-to-peer sites to download music and as such there has been a decrease in record sales which has affected to recording industry in negative ways.

In both of the discussed instances, legislators have been forced to developed laws based on the increased use of technology and the types of technology that are available. Although there are some federal laws that govern internet use, there are also many laws that are different or are not present at all based on the jurisdiction. In any case social networking sites are impacted by these laws. As such the individuals that own these sites have a responsibility to ensure that users know what the laws are and the consequences associated with the violation of such laws.

Sociocultural Trends

People seem to have an overwhelming desire to be connected to one another via technology. People of all ages have cell phones and other devices that allow them to stay connected. This technological mindset is a sociocultural trend that has forever changed the manner in which people interact that the types of relationships that people have.

Another sociocultural trend is the "going green" phenomenon. This phenomenon is associated with being environmental friendly and making lifestyle choices that reduce damage to the environment. This includes everything from recycling cans to composting. Many companies have also developed products such as cleaning supplies that are more environmentally friendly. The awareness of the harm that has been done to the environment has forever changed the manner in which people function in society.

The obesity rate in American and the subsequent diseases and illnesses that can develop as a result of obesity. In addition, vanity is a widespread issue throughout the country and the media perpetuates certain notions about what is beautiful and acceptable and the image is usually of someone who is not overweight. For this reason the diet and fitness industry makes billions of dollars each year with nutrition and exercise programs designed to help people lose weight.

Global Trends

From a global perspective the world is becoming much smaller. Globalization has become possible because of the advent of the internet and the ability of the internet to connect people regardless of borders. The internet has also changed the manner in which companies throughout the world function by creating applications that allow for 24-hour financial transactions. This has forever changed the manner in which business is conducted.

Another global trend, particularly is microloans, particularly in third world countries. Microloans are given to individuals to start or expand a business. These loans are usually given to sole proprietors and can make all the difference between living in poverty and being able to provide an education for their children. These types of loans have grown in popularity because they assist people who cannot get loans in conventional ways. In addition they are successful because they have high rates of payback which permits others to also take out loans.

Industry Analysis

The concept of social networking sites first came to the attention of the public with the development of sixdegrees.com in 1997. This particular sites allowed users to connect to friends, family and associates based on various degrees of separation. It provided users with a place to send messages to one another. Ultimately this site was sold to Youth Stream Media Networks for $125 million. However the demise of dot com companies that came in 2000 led to the end of youth stream media.

Since this time both professional and recreational networks have become popular and been able to maintain a base of consumers who have remained with the companies despite an influx of new companies. In the early 2000 sites such as Friendster and Myspace emerged as social networking sites, particularly for young people. Since this time Facebook and now Twitter have grown substantially in popularity.

The social networking industry, continued growth is expected for the foreseeable future. According to Swartz, 2008 "Facebook, MySpace and other social-networking sites have been the rage of the tech industry for more than a year. Following investments by Microsoft and News Corp., the companies are valued in the billions of dollars and are considered blueprints for how to build a website. It is a parlor game that has Silicon Valley buzzing. With online ad spending booming into a nearly $50 billion market this year, there is plenty of money to be had. Big-name advertisers are drooling over millions of young, affluent consumers who are spending more time on their online profiles than in front of TV and movie screens. They are particularly smitten with the prospect of tailoring ads to people's specific interests (Swartz, 2008."

In addition amongst people in their teens and twenties, social networking is particularly popular. The Pew Center reports three quarters or 75% of people in this demographic have a profile on a social networking site such as Facebook. With these things understood the use of social networks are sure to continue well into the future and companies that operate in the industry will have the ability to realize a great deal of profits well into the future. In order to fully exploit the popularity of social networking companies have to have a keen understanding of the forces that propel the industry. The next section of this discussion will focus on Porters Five Forces.

Porters Five Forces

Buyer Power

In some ways the social network industry is different from other types of industries as it pertains to buyer's power. This difference exists because users don't have to purchase anything because the services provided in this industry are free. However users still have power because they have the ability to choose which websites that they will open account with. As such social networking sites must ensure that they offer the services and products that customers want. In addition companies within the social networking industry should attempt to develop products that are forward thinking and provide them with the opportunity to grow and expand.

In the case of Facebook buyers or users have a great deal of power because they can choose not the use the site or choose an alternative site. Facebook is not the only site that allows users to communicate with one another and share media. With these things understood buyers have a significant amount of power.

Supplier Power

In the context of social networking sites supplier power is also different than in other types of industries. This difference exists because unlike traditional companies that sell products, Facebook offers a service. Granted the company utilizes servers and must have a certain amount of bandwidth to ensure that the site functions in the manner that it is intended to function but these issues are not as significant because the companies that allow the use of their servers and bandwidth do not have much power as there is competition that exist amongst the suppliers.

To some extent there is a great deal of vertical integration as it pertains to the development of programs and application for use on Facebook. Facebook does not have to outsource programmers and there is no shortage of people who have the ability to program the applications used on Facebook. With these things understood the suppliers have very little power.

Rivalry

Amongst the various social networking sites the presence of rivalry exists. Many of the social networking sites have identical feature such as allowing users to post pictures and videos. In addition there are sites that appear to be alike but have different application. For instance twitter is a social networking site that has features that are similar to those of Facebook as it pertains to the ability to have subscribers, friends and the ability to post pictures and video. In addition there are newer sites such as blogtv that allow people to interact with one another via video in real time. Some users will be more attracted to twitter because of the instantaneous nature of the site.

"Twitter is also looking to expand its presence across the Web with its @anywhere service, which will allow people to log in to Twitter from other Web sites," the New York Times article continues. "The moves by Facebook and its rivals set up a battle for control over social interactions across the Internet....So far, Google's answer to these battle cries has been the creation of Google Buzz, a partnership with fading social media star MySpace, not to mention a pre-emptive rollout of its own real-time search platform. But that's been getting decidedly mixed results. In fact, the whole idea of "search advertising" is questionable, according to some online marketing experts...Search advertising clearly made Google the powerhouse it is today, with $23.7 billion in annual revenues last year," but a big question is how well it will work for real-time search, which is Twitter's bread and butter (Internet Social Media Rivalries Heating Up, 2010")."

Obviously there is a great deal of rivalry in the arena of social networking as companies jockey to gain a share of the market. The impact of these newer sites such as Google buzz remains to be seen. However it is evident that the social networking industry can be viewed as a promising business endeavour and as such many companies that have specialized in other types of business such as Google are beginning to expand into the social networking arena.

Barriers to Entry

At the current time the barriers to entry are dependent upon the skill sets of those attempting to enter into the industry. Many of the most successful social networking sites were started with very little capital. Once these sites were able to generate traffic they were able to attract advertising dollars and realize a profit. Although there are many social networking sites that currently exists the barriers to entry are so low and the changes in technology occur so rapidly that new sites are constantly being developed.

Threat of Substitutes

The threat of substitutes is always a concern for this industry, because people are constantly developing ideas and technology changes so rapidly. The development of new ideas has led to the phenomenon that is twitter. The presence of substitutes is also a major issue for any company in this industry because most sites are absolutely free to users. Users do not have to subscribe to use the content and in some cases such as twitter, users can even be paid for tweeting. With this understood the threat of substitutes is substantial. However, some users will opt to stay with social networking sites that they are the most familiar with and that their friends are also connected to. In this respect some social networking sites have loyal customers that will not leave the site.

Strategy Formulation

Facebook began as an electronic form of face books that have been on college campuses for many years. In fact, when Facebook first began only college students were allowed to become members of the site. After some time the company expanded and now allows people from different age groups to be a part of the site. If Facebook is to be successful as it pertains to remaining relevant in the social networking industry it must continue to embrace strategies that will guarantee success.

Strategic Alternatives

For the purpose of this discussion four strategic alternatives will be explores. These alternatives are as follows:

1. Strive to increase the number of users over the age of 26-the graph below depicts the age and gender of people who are Facebook users. As you can see the majority of people who utilize Facebook are between the ages of 18 and 26. Granted this is due in part to the fact that Facebook was originally designed to meet the needs for that age group.

Indeed at the current time Facebook remains as a networking site most popular amongst highschoolers and college aged individuals. However, there is an opportunity to expand the people that se Facebook and such expansion is necessary if Facebook is to be relevant in the future.

Facebook must make a concerted effort to demonstrate all of the services that Facebook has to offer and the ways in which the presence of such a network can assist them in keeping in touch with friends and family. One of the major benefits of Facebook is that it is a free service. In these trying economic times such services are both needed and necessary.

One of the primary age groups that should be targeted is baby boomers. These individuals are part of the generation that were instrumental in forming the foundation for the technologies that are in use today. This age group is therefore technologically savvy and could really enjoy the services that are available through Facebook. Many of these individuals also live long distances from their adult children and could benefit from having access to a site that will

2. Ease of use and increased privacy settings- Facebook must make some of its applications easier to use particularly as it pertains the security and privacy settings. Although the company has increased the number of options available for security and privacy, some of these options are confusing and should be made more user friendly. User friendly applications keep members happy and decrease the likelihood that they might choose another site.

Making these applications more user friendly is also important as it pertains to the privacy and security setting because it guarantees that the proper settings are present and that people cannot see aspects of a profile that they are not intended to see. This is important as it pertains to keeping people safe on the internet. When people know that their profiles will be protected they are more likely to use them fully. Facebook could benefit greatly from a focus group that is concentrated on making its website more user friendly. Such a focus group would show Facebook how to make their website more functional and thus more prosperous. A more user friendly interface will definitely guarantee that the company will be able to compete well into the future.

Additionally, even though Facebook has just introduced new more extensive privacy settings within the last year, some want the company to develop and implement even more extensive privacy settings. According to one article "ten advocacy groups are want the social network to do more. The groups are asking for six additional privacy changes, ranging from providing a more secure user connection to the Facebook site, to giving you more control over how third-party apps access your data (Paul)." These changes include addressing the application gap, stop using trackers, instant personalization and HTTPS, Full Control and Export Option. The application gap is associated with the control users have as it pertains to the types of data a third-party application such as Farmville can access (Paul). The advocacy groups assert that the most serious problem associated with application gaps is that users public information can be shared with these third parties whenever someone in a users friend list uses one of the applications (Paul).

In addition Facebook needs to address the issue of tracking users and instant personalization. The advocacy groups believe that Facebook should stop tracking users. According to the article Facebook currently tracks

"the Web browsing activity of its users whenever they visit any site that has Facebook's social plugins installed, such as the universal like button....Even if you don't click on the Facebook social plugin, the social network will still track you if you're logged into Facebook, the letter claims. The groups call on Facebook to stop tracking people unless they interact with Facebook's plugins and also calls on Facebook to make the logout button more prominent on a user's Facebook homepage. Currently, the logout button is buried under the 'Account' drop down menu in the top left corner of your Facebook dashboard. (Paul)"

Instant personalization on Facebook is also another issue that needs to be addressed. This is associated with the idea that Facebook should not automatically enroll users into the instant personalization feature. This feature allows third party sites to instantly personalize a members facbook page. Facebook should place all the control in the development of Facebook pages in the hands of Facebook members.

The final privacy setting that needs to be addressed is the HTTPS, Full Control and Export Option. At the current time users do not have the ability to decide who they want to share their information with and to set their privacy settings in a way that honors their wishes. All of these privacy issues need to be addressed to ensure that the company can continue well into the future is the manner that protects users.

3. Foreign news source- at the current time Facebook is available in many countries throughout the world. In fact 70% of Facebook users live outside of the United States. The following graph (taken from Eldon, 2008 shows the rapidly increasing number of global users for Facebook.

For people in some countries Facebook has meant the difference between life and death. In addition, in countries such as Iran where political instability has been present recently Facebook played a pivotal role in exposing some of the injustices that were occurring when the foreign media was shut out. Facebook can serve as an excellent source for news because it is present in many different countries. In many countries, including the United States the information present to the public is what the media wants to project which is not necessarily the truth. Social networking sites such as Facebook have the opportunity to put the delivery of news back in the hand of the people. This means that more accurate information can be given to the public. This is of particularly in countries that are notoriously controlling as it pertains to the press.

4. Collaboration- at the current time Google is attempting to branch into the social networking industry. However it might be more advantageous for Facebook and Google to work together to create a social networking cites that is efficient and offers certain application in real time. Facebook already has a strong following that might take Google many years to build. On the other hand, Google has expertise as a search engine and has a tremendous brand that has become synonymous with internet searches. These two companies have the capacity to collaborate and together develop a social networking site that could forever revolutionize the manner in which people interact on the internet. Facebook must be willing to operate outside of its comfort zone to make such a collaboration happen.

Alternative Evaluation

All of the aforementioned alternatives are consistent with the types of things that Facebook could achieve and in line with the company's core competencies. As it pertains to the first alternative of striving to increase the number of users over the age of 26, this particular alternative, Facebook has been successful in the past at introducing a new demographic to the site. With this understood, Facebook has the ability and the popularity necessary to ensure that additional demographic groups such as baby-boomers also become a part of the social networking site. This is a feasible alternative that could be of great benefit to the company if it is properly implemented. Facebook has to find a way to expand the number of people who use the website as it pertains to different age groups. The baby boom generation is one of the most active and involved generation and they have the potential to be a source of new Facebook users.