STRATEGIC MANAGEMENT

Strategic Management



Strategic Management

Introduction

In this paper, we will critically analyze the case study for Facebook and discuss the strategies and conventional models which can be used by social networks in order to function effectively. Facebook is considered as a social networking service which was launched in 2004 and was owned by Facebook Inc. In 2012, it was noted that Facebook had 1 billion active users and among them half of them used Facebook through mobile device (Facebook users in the world, money.cnn.com)

Facebook was founded by Mark Zuckerberg along with his colleagues who in Harvard University. They were named as Andrew McCollum, Chris Hughes, Eduardo Saverin and Dustin Moskovitz. The membership of the website was limited to Harvard University founders and was expanded to other colleges in Boston Area. In the second and third stage of its development, the social network site extended respectively to high schools in September 2005 and to corporate networks in the early year of 2006. Facebook allows users who declare them to be at least 13 years to be registered users for the website. Gunning (2009) stated that Facebook is considered as a social utility that connects people, to keep up with friends, upload photos, share links and videos.

Application of Porters five forces to understand the competitive advantage

The below mentioned are the main aspects of Porters five forces for analyzing the case of Facebook.

Bargaining Power of customers

Facebook has been used as an advertising platform soon after its start, through application Facebook Ads. Advertisements on Facebook are subject to an auction, where advertisers compete among themselves for an audition through bidding the price of click on their ad (pay per click) or the price of displaying their ad to selected target group pay per impression (Dess et al, 2005, p. 54).

Advertisers get suggested bid range which currently is winning the auction among similar adverts. The advertiser sets maximum bid per click or per thousand impressions, but Facebook charges only the amount required for an advert to win an auction. This price may be lower than the maximum bid set by advertiser, making a marketing campaign more efficient. Advertisers have also control of their daily budget the maximum amount that can be spent on campaign per day. If a daily budget is spent, the advertisement will automatically stop showing until next day of a current campaign.

Facebook has wide advertising targeting options, which can improve performance and effectiveness of a company's online advertising, because ads are displayed to the users who are most likely to be interested in advertised object, thanks to information shared on Facebook users' profiles. With such a precise targeting company can reach demanded customer group according to its advertising goals. Facebook Ads targeting tool shows the estimated number of users encompassed by firm's ads, so it is easy to widen or constrain a target group. For an advertisement any number of targeting filters can be set.

Bargaining power of Suppliers

At present, Facebook has $845 million active ...