Facebook

Facebook is a very popular social network. The official date of foundation of the website is February 4, 2004. The main advantage of the social Networks of those days has become precisely the possibility of contact: Zuckerberg offered people a simple and convenient way to share information about each other. (Kirkpatrick 2010).

Strategic analysis

PESTLE external analysis.

 Politics factor:

• A wide variety of political demands of various countries of the information systems, the presence of some countries, and government regulation (China, Korea, Russia, etc.) can reduce the number of Facebook users by censorship.
• The need to exert political influence on the citizens from the forces of opposition and those in power (Egypt, for example) and the constant political activity in one country, then another, then a few at a time (elections, changes in legislation, etc.) may limit access to the social network as a result of the activity of the special services.
• Property law may slow the development of the social networks and integrate them into daily economical factors (Jarzmensky 2012).

Economic factors:

• A wide variety of economic characteristics in different countries (inflation, recession, etc.) allows the local competitors have a privileged position at the expense of deeper acquaintance with these features.
• The presence of unstable and poor economic conditions (the Dominican Republic, Egypt, India, etc.) can reduce the cost-effectiveness of the network, etc.
• Different levels of welfare in different countries and different purchasing power affect financial performance.
•  The constantly changing exchange rates and ratios may create a competitive advantage to the competitors.
• Different costs for energy, communications, etc., in different countries and the constant changes of these parameters complicate the work and create the ground for the emergence of substitute products.
• Transnational economic cooperation (national payment systems, acquisition, merger, partnership, etc.) and the development of e-commerce contribute to a more successful financial turnover of the company and its benefits (Helft & Hempel 2012).

Social and cultural factors:

• Multiple languages of different language groups, the abundance of dialects, as well as the diversity of cultures, religions and everyday practices, and different attitudes toward leisure and communication that reflect the desire of many users to communicate with representatives of the country, have the advantage of in-country competitors.
• Different levels of computer literacy in some countries do not develop the network properly.
• Increasing intercultural and inter-state interaction among the people has supported the need for inter-country communication systems.

Technological factors:

• Unequal terms of access to the Internet and the development of this field in different countries complicate forecasting the development of the network and are the indirect evidence that the increase in the number of Facebook users will come from countries where Internet access is unsatisfactory.
• Different levels of the development of the national lines in some countries can use Facebook as a means of constant communication, while others are irregular.
• Different levels and paces of R & D and technologies in different countries are hampered by the inclusion of users and application developers.

Porter`s Analysis of 5 Forces

Porter`s Analysis is the analysis of the key competencies of the company.

In 2011 the Facebook brand was valued at $ 3.7 billion. The key competencies for today can be considered (Helft & Hempel 2012):

• The ability to establish and maintain the interest and the loyalty of the vast number of users, to stimulate their activity. Facebook has over 620 million registered users, half of which come to the site daily. These users are active: in total they spend on the site 700 billion minutes per month. On average, each has 130 friends and creates about 90 pieces of content (links, news, photo albums, etc.) and they also install more than 20 million applications per day.
• The ability to motivate the staff and independent developers of applications, and the ability to manage them. Today it has created a variety of more than 550 thousand applications (Helft & Hempel 2012).
• Professionalism and dynamism of the team. Moreover, the team can be divided into core (the people working on the staff) and, relatively speaking, the freelancers (people creating a variety of applications for Facebook).
• The financial system (including investment), and the relationships with various major companies. Goldman Sacks has invested $ 450 million.
• The system of partnership: over 2 million websites are integrated with Facebook. Among them are companies as big as Twitter, Microsoft, MySpace, Yandex and etc.
• The ability to achieve high growth of the income rates and the value of the company: 177% revenue growth (Forbes 2011), a five-fold increase in capitalization in 2009 (Forbes 2011).
• Attracting a large share of small companies in the advertising revenue: 60% of small companies. This ensures more stability than a few large advertisers.

SWOT Analysis

Strengths:

• The company has more than 620 million registered users, which is each 13th person in the world.
• Strong Facebook user: often comes to the site and downloads the application. 48% of people aged 18-34 check Facebook as soon as awake.
• Continuous development of range of applications due to the abundance of independent developers and full-time.
• Well-established in many examples the system implementation and promotion of Facebook applications.
• High profitability: $ 1.86 billion Facebook earned in 2010 (iFacebook 2011).
• The cost of the global Internet brand of 3.7 billion dollars, the interest of the public network (a movie, a success story, etc.) (Zuckerberg 2010).
•  Growth in the value of shares.
• A wide network of partnerships. More than 2,000 sites. Back in 2008, Facebook has released an application that allows the site to integrate with the social network (Zuckerberg 2010).
• Facebook – is second only to Google in providing video traffic (Locke 2007).
• Involvement of the social network of communities. As an example, Facebook is open to journalists.
• Support for start-ups (Hoffman 2008).
• Instrument to influence the social and political situation (known people post on their pages, etc).

Weaknesses

• Virtuality of the resources. Relying entirely on the Internet and other characteristics. The greater reliance on human resources.
• Low representation in some countries because of the political or competitive situation, and the technical features (access to the Internet, for example).
• The opacity of financial activity: lack of public annual financial reports which display the company’s IPO pushes some investors and developers (Zuckerberg 2010).

Opportunities:

• Establishment and maintenance of a permanent durable presence on the network, the prolonged consumption of the content, advertising, etc. The average time in social networks is 25 minutes (Zuckerberg 2010).
• Development of the direction of video content. Facebook generates 9.5% of all video traffic, which puts the network in second place after Google (55%) (McGirt 2007).
• Co-branding and cooperation with other companies from different sectors, and expanding partnership.
• Having access to a large audience, in order to sell and offer a wide variety of goods, such as electronic devices. The popularity of such devices is growing with the development of the society.
• The development of service offerings for Facebook, as many countries of the world are deepening presence by learning and using specific (Stone 2008).
• Planned in 2012, access to the IPO – the potential to increase financial and intellectual investment (Sengupta 2012).

Threats

• The investigation of the soaring stock Facebook can lead to the negative consequences for the value of the brand and the company, especially before placement on the IPO (Lacy 2006).
• The explosion of “bubble”: the disappointment in the brand and the company’s structure, the sharp decline in the value. The statistics Exchange assesses Facebook to 25 times higher annual income (Google, by comparison, only 9 times) (Locke 2007).
• The breakthrough in competitor’s activity and as a result the emergence of the substitute products hazard to the number of users and their activity. Negative activity of potential Facebook buyers reduces the cost of the company (Apple, Yahoo …) (Lacy 2006).
• The negative impact of the partners and investors on the financial, intellectual and technological activities. Among the partners, there is a very large company with the potential to make changes in Facebook (Locke 2007).
• The potential political influence of the network. Some countries may prohibit or restrict the access to Facebook with the intention of preserving the political system (in particular, the example of the Vatican) (Rosen 2005).
• The interest of the security services to the resource policy in some countries (China, Korea, maybe Russia …) (Hoffman 2008).
• Reduction of the rate of the Facebook development. As a consequence of this and the preceding paragraphs the audience interest may blur and in this case there will be overflow to other resources and loss of activity (Hoffman 2008).
• The outflow of the users for technical reasons, because of the inconvenience. According to some business people, Facebook is not easy in maintaining the service and business relations (Zuckerberg 2010).
• The danger of cultural mismatch. Work in many different countries makes it necessary to be specific, but it is pretty hard (Rosmarin 2006).
• The need to access the Internet and the level of skilled users.

Conclusion and Recommendations

Thus, carried out the SWOT analysis of microenvironment, and the PETS analysis of the Macro environment, having used the 5 Porter`s forces and Market Mix analysis it can be concluded that the main strength is the numbers of users and the access to different parts of the world. The PETS analysis showed, that the company has very good economic strategies, thus the advantage is in releasing the new type of product in the country, where the similar ones have not been released.

Referring to the economic factor, we emphasize the two most important theses. The first is the explosive growth in popularity of social networking if not inevitably end in failure; in case of collapse it surely will go to the stagnation. The analysts agree that the social networks could suffer an ignominious downfall of the dot-com bubble. Thus, the company Datamonitor predicts that the peak of growth of the number of users of social networks was in 2009 and by 2012 growth would come to naught. The experts believe that by the end of this year, the total number of users of such sites will reach 230 million in turnover, received by owners of social resources; this year the price will rise to $ 2.4 billion, and then begin to decline. So unreasonably large investment leaders in the IT-industry social networks, apparently, will not bring the proper dividends(Socialbakers Employee 2011). Recall, we are talking about acquiring corporation AOL social network Bebo for $ 850 million and investments in Facebook are $ 240 million (Helft & Hempel 2012).

The major component of the social networking is the selling of advertising space and charging a user fee for providing the service. The first option for the optimization of the work of Facebook is the “emotional” factor; the second is the “rational” one. It is obvious that transferring the social network exclusively for paid basis immediately leads to the collapse. The greater amounts of the users are not willing to pay even $ 2 per access to the social networks (Helft & Hempel 2012).

Furthermore, evaluating the weaknesses we can make the conclusion that Facebook is a very powerful set of information which is someone might be willing to have, therefore the protection level should be better.

Finally, low representation in some countries because of the political or competitive situation, and the technical features (access to the Internet, for example) can be overcame due to the creating the partnership with the other companies.