Porter\'s Five Forces of Competition

Porter's Five Forces Of Competition

Imagine studying the biggest social network website in the world. As everyone knows this is Facebook. They are a giant when it comes to bringing people from around the world together that are family and friends. Each person has a unique characteristic that makes this company effective. One will discuss Porter's Five Forces with this organization, along with a SWOT analysis to put it all into perspective.

The first of Porter's forces includes that of competitive rivalry. Since the inception of Facebook in 2004, they have over "500 million users around the world" (The New York Times, 2011, para 2). After all, Mark Zuckerberg was a Harvard student when inventing this website and phenomenal company that continues to grow as big as Google (Facebook, 2011a). In fact, this is one of their arch nemesis. Not only them, but also Twitter, Yelp and many others (Marcus, 2009).

This makes competition tough for multinational enterprises (MNE), especially for those that do social networking. Through their hard work, they were able to make sure their market was for both teenagers and adults. "In country after country, Facebook is cementing itself as the leader and often displacing other social networks, much as it outflanked MySpace in the United States" (The New York Times, 2011, para 1). In fact, by 2010, they were the largest company that does social networking on the World Wide Web. They were able to double their space as of 2009. Because of these endeavors, Facebook executives were able to double their size, and did manage to push away their competition from those who are international (The New York Times, 2011). This company is a huge success and could become as big as Microsoft because of the growth that has occurred internally and externally around the globe with employees and loyal customers for their chosen market.

But it has also come to be seen as one of the new titans of the Internet, challenging even

Google with a vision of a Web tied together through personal relationships and recommendations, rather than by search algorithms. In a major expansion, Facebook has spread itself across other Web sites by offering members the chance to "Like" something

-- share it with their network -- without leaving the Web page they're on (The New

York Times, 2011, para3).

The next force that is worth consideration is that of new market entrants (Mintsberg, Lampel, & Ahlstrand, 2005). As one can tell, Facebook is making it difficult for others to have their business enter into the online world of and social networking because of how fast they are growing. "In May 2011, Facebook was working on developing features that will make the sharing users favorite music, television shows and other media as much a part of its site as playing games" (The New York Times, 2011, para 4). This does include the option of putting photos on the site. According to various analysts, they believed that this was due to the fact that they wanted to have a hub for a variety of activities that one can access on the Internet (Facebook, 2011d).

Facebook had the audacity to raise as much as $500 million from the renowned company of Goldman Sachs as well as a Russian investor as of January 2011 (The New York Times, 2011). This made their own organization value at as much as $50 billion; consequently, they are worth more than "eBay, Yahoo and Time Warner" (The New York Times, 2011, para 4). With this strategic move, this makes Facebook an immense giant against Google and many others that are well-known on the Internet (Kim & Mauborgne, 2005). This makes them a threat with other online companies. Through their tactical positioning, they have dominated various companies through their one having the capabilities of searching them on the Web as well as their placement in all corners of the globe (The New York Times, 2011). Their content also makes it difficult for Google to have as a part of their own firm, which makes rivalry occur (Facebook, 2011b).

Buyer power is worth considering when it comes to Facebook (Quick MBA, 2011). They allow it for people to advertise on their company for various goods and services that one provides on a regular basis to the public, such as selling a book or having one's own page to advertise it. These are usually a big hit because a person is able to let thousands or millions to know through target marketing (Mintsberg, Lampel, & Ahlstrand, 2005). However, a person will have to do a separate ad for Google in order to advertise their business for all people everywhere to get a hold of it. Since this is the only option available for users who utilize Facebook, this brings in billions of dollars a year because they are making it difficult for people to advertise elsewhere, unless one chooses to go through another organization to make it plausible (Facebook, 2011a).

For example, when Facebook had a deal with Goldman Sachs, they chose to limit this to only private companies. Management chose to reveal this to the public due to the Securities Exchange Commission (SEC) started to inquire of the practices of the Internet giant (The New York Times, 2011). Not only that, but also Goldman Sachs chose the same strategy as Facebook. This is because they most likely saw the value of going this route knowing that they can make a plethora of revenue a year going this route. In essence, a huge market is available for going this route, especially for all the social networking sites, such as "Facebook, Twitter, Zynga and LinkedIn" (The New York Times, 2011). Some believe that this is a means of getting around any necessary requirements in order to make sure that they do not have to disclose to the public their practices of what is going on within the company itself. Regardless, this does include that of foreign investors too. They are excluding that of business owners in the U.S. because of any kind of worry that could have arisen through the entire process (Facebook, 2011e).

One needs to consider that of product and technology development (Marcus, 2009). Facebook is constantly expanding on their website. In fact, they frequently add new games for their consumers, such as an updated Bejeweled Blitz or Wheel of Fortune. Each person has the option to choose from a variety (Facebook, 2011c). However, the catch is to compete against your friends by seeing what it is they are ranked at in order to surpass them. This allows for friendly competition, and all of it is free for the person to use. In fact, all aspects of the website are free, unless an individual chooses to advertise on it (Facebook, 2011b).

The other aspect of the social networking site is that a person can have a fan page. For example, the Duke and Duchess of Cambridge have multiples of these for people to stay current on what is going on in their life as well as in England. Many people recently wished them congratulations on getting married (Quick MBA, 2011). Not only that, but also they have it to where a person can ask a question or "like" a page that is appealing or of interest to him or her. In fact, at least thousands or more of these exist, and it does help with advertisement costs by getting more people involved. He or she is likely to enjoy this aspect regularly by means of making sure that people tell their friends of how wonderful Facebook is for all ages (Facebook, 2011d).

These are all ways in which Facebook has impacted the world with their technology. Their product development is by means of having their users advertise on the World Wide Web. Furthermore, when it comes to the games, a person can purchase additional items needed to play any of what is available more efficiently. Each of them has a means in which to make sure that they do get revenue from their loyal consumers of all ages. This helps the company to grow and prosper as a means in which to make sure that they are worldwide in order to meet the needs of others (Facebook, 2011d).

The last area is that of supplier power (Quick MBA, 2011). Facebook does not have much when it comes to have suppliers. If anything, they take advantage of the immense servers needed to maintain their company on a regular basis in order to have additional space for old and new users that enter the social media networking scene (Facebook, 2011a). They would need multiple positions to cover these areas in order to make a difference in society. Each of these people will have the option to block or make sure that they choose to friend or unfriend individuals one does not like or get along with on the World Wide Web (Kim & Mauborgne, 2005).

Since they are a huge organization, they do have some level of power with their suppliers. In fact, many of them are more likely to make sure that as much space is provided when it comes to taking over the Internet. For example, these individuals want to make sure that they are likely to get what it is they want by having a Web presence. This means that they are going to do everything possible to have as many contacts as possible from off the Internet in order to get as much revenue as possible that it could lead to a monopoly. In essence, if a monopoly does occur, then they are going to face breaking the law in the process. Furthermore, privacy issues are concern because of how much of a giant they have become since the inception of the organization as of 2004 (Facebook, 2011d).

By studying Porter's Five Forces, one learns that Facebook is an MNE that is as big as Google. They are constantly growing in all aspects by means of internally and externally. At least hundreds of individuals are on their staff, and thousands or millions use Facebook daily. Each of these gives them much control by causing rivalry, buyer and supplier power, product development and so forth. Regardless, Facebook relies on these, so that they can meet the needs of the community through the Internet as well as their contacts around the world through expanding to new markets (Mintsberg, Lampel, & Ahlstrand, 2005).

Facebook has much strength that is worth mentioning (Kim & Mauborgne, 2005). The organization is able to meet the needs of others by means of creating games, using fan pages, and making sure that they are able to make a difference in the world by allowing a business or individual to advertise on their website. Since the business is so current, their employees are constantly going through continuing education classes, so that they are able to keep up with their target market that is constantly changing. Each person is striving to make the company continue to reach all parts of the world. They started in the United States, and the organization is present in Europe and Asia. However, Facebook is striving to go to Africa and South America in the years ahead. This could take many months and years to accomplish, but the executives have the skills and education to make this possible (Quick MBA, 2011).

Many other fortes are important. Facebook has founders who are Harvard trained, and those that are in management do have an MBA (Facebook, 2011e). With these great minds, they are able to make sure that their organization becomes widespread for all ages. This company has the education and experience to hire individuals that are qualified to work for them. Not only that, but they are located on the coast, so this was strategic in reaching people who were interested in their products and services. These individuals have their weekly meetings in order to make sure that goals are achieved on a regular basis, such as going to other parts of the globe. They have the funds to do it, and each of them makes a difference in making it happen by negotiating to other business professionals. Because of their hard work, one has to note that each of them are doing whatever is possible to grow as an industry. Their examples have encouraged many other social networking sites to emerge, such as Twitter and MySpace. Facebook has rivals and this continues to cultivate daily as new sites enter the market (Marcus, 2009).

The weaknesses are what are holding back Facebook in reaching their full potential. In regards to the biggest weakness is that of privacy (The New York Times, 2011).

Like other social networks, Facebook allows its users to create a profile page and forge online links with friends and acquaintances. It has distinguished itself from rivals, partly by imposing a Spartan design ethos and limiting how users can change the appearance of their profile pages. That has cut down on visual clutter and threats like spam, which plague rivals. It has decisively outstripped other networks that preceded it, like MySpace

and Friendster, becoming what many analysts see as the "default platform" of a new age of information organized around personal relationships (The New York Times, 2011,

para 10).

The privacy issue has become a hot topic over the years. They are trying to define standards for everyone, especially since we are "in the Internet age" (The New York Times, 2011, para 11). As of May 2010, management had set forth new controls in order for individuals to grasp what one can share online as well as with whom. However, their biggest mistake was that of their privacy features became increasingly complicated; consequently, many of the users were not able to fully use them properly on the website. Because of this, as of October 2010, the company did manage to acknowledge that information was shared that did identify individuals who played games, such as Farmville. This made other companies track the person. Now they are seeking ways to not let it happen again (The New York Times, 2011).

Another area that is a weakness is how Facebook originated. Much controversy is on this issue as well. "Three other Harvard students maintain that they came up with the original idea and that Mr. Zuckerberg, whom they had hired to write code for the site, stole the idea to create Facebook" (The New York Times, 2011, para 12). The company has denied these allegations. Not only that, but a lawsuit is pending with this matter. Furthermore, another student claimed that he coined the idea of it as well, Aaron Greenspan. However, he will not enter into the legal battle, despite the fact that he came up with the architecture of it (The New York Times, 2011).

As of 2010, a movie was made about Facebook and its origins arose, that was created by A.O. Scott (The New York Times, 2011). He called it "a creation story for the digital age and something of a morality tale, one driven by desire, marked by triumph, tainted by betrayal and inspired by the new gospel: the geek shall inherit the earth" (The New York Times, 2011, para 13). The film exaggerated Mr. Zuckerberg, and how he did manage to have much arrogance because of it (The New York Times, 2011).

Facebook has a plethora of opportunities before them to continue to prosper in the years following. They are able to expand to new markets, such as South America and Africa. This means that they are willing to become a part of a monopoly, or to make one because of how wiling their executives are wanting to go to all parts of the world. Thorugh these efforts, their organization is going to reach the billions or trillions because of how popular the website is to their target market (Mintsberg, Lampel, & Ahlstrand, 2005).

Another opportnity is to make sure that they are current with various technologies and product development. Since a plethora of games are already present, many of the executives are having the opportunity to add more (Facebook, 2011a). This can lure in new users to the website and for it to continue to grow. Management learns of new ways in which to implement them, and then a person will find out about them through a friend, which will entice someone to get addicted to the website to keep coming back for more (Facebook, 2011c). These provide endless possiblities by adding various applications for consumers to enjoy (Facebook, 2011b). Not only that, but also a person can stay current on getting a newsletter from the company after advertising from management (Kim & Mauborgne, 2005). They do this sometimes to allow others to market their company or services in an efficient manner, especially if they had a wonderful experience with it (Facebook, 2011e). For example, more business was generated for the individual because of utilizing Facebook to make it all happen. As a result, the person is thankful, and he or she will want to continue this effort in the days ahead. Regardless, both organizations benefit, which keeps them prospering to meet the needs of the community and world (Facebook, 2011d).