The Business and Corporate Strategies at Facebook

Subject: Strategic Management
Pages: 10
Words: 2786
Reading time:
12 min
Study level: Bachelor

Introduction

Corporate strategies are at the core of modern management practices. Many scholars agree that corporate strategy is a major subject for both academia and practitioners since it helps discern such aspects as organizational scope decisions, including alliances, mergers and acquisitions, and other strategic moves made by a firm (Feldman, 2020, p. 180). Additionally, every strategic action taken involves a certain degree of risk, which means that value can either be created or destroyed. In other words, corporate strategy dictates the future of developmental directions and allocation of resources in an enterprise (Li, Cui, and Zheng, 2021, p. 3). The focus of this report is on Facebook’s chief executive officer (CEO), March Zuckerberg. The report discusses the business and corporate strategies, strategic tools and techniques, environmental analysis, levels of strategy, and strategic planning that have been used at Facebook.

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Business and Corporate Strategies

An alignment between business and corporate strategies is critical for any business. According to Wadström (2019, p. 44), such an alignment allows strategies and executives to achieve both corporate and business strategies to enhance the overall competitiveness of a firm. In this case, the business strategies encompass customer satisfaction, product choices, or competitive advantage. At Facebook, the business strategies implemented by Zuckerberg nclude a continuous user experience and new product development (Dudovski, 2017). Facebook has arguably one of the most uncompromising approaches to user experience as the company seeks to balance between customization and standardization. Since its establishment, Facebook has continuously improved user experiences with new designs and more interactive user interfaces. Today, Facebook users can also enjoy a wide variety of experiences ranging from personal accounts to group and business pages. Similarly, improved functionality allows users to plan events, stream live videos, and share both textual and visual audio content, either to the public or selected groups. This business strategy has allowed Facebook to become one of the fastest-growing social networking sites across the planet.

New product development is at the core of many companies’ business strategies. The success of firms in new product development is influenced by such strategies as research and development (RandD), corporate cultures, and innovation (Cooper, 2019, p. 36). According to Dudovski (2017), new product development remains the most important business strategy for Facebook. As a social media site, Facebook has managed to offer a product portfolio comprising Profile, News Feed, Groups, Events, Messanger, Video, Search, Photos, Pages, and Instagram. As mentioned earlier, all these products serve one major purpose: to continuously improve user experiences. The CEO recognizes that many competitors will offer the same or better products if Facebook stops innovating and offering users new experiences. This may explain why acquisitions have become part of the corporate growth strategy.

Contrary to business strategy, the corporate strategy focuses on the overall scope of the firm to fulfil the expectations of the stakeholders. According to (Agrawal, Schaefer, and Funke, 2018, p. 165), corporate strategies are driven by both resource portfolio and environmental characteristics. Based on these two elements, Zuckerberg has adopted the use of acquisitions are a major growth strategy. Among the high-profile acquisitions that now comprise Facebook’s portfolio include WhatsApp and Oculus VR, Inc. the environmental characteristics behind these decisions include the stiff competition from social media companies, most of which offer different user experiences than Facebook.

External and Internal Environment Analysis

Facebook faces several complex issues in its internal and external environment. However, it can be argued that most of these environmental issues arise from the rapid growth and expansion of the business. According to Najar (2019), Facebook went public with an initial public offer (IPO) that made it the largest social media company. Since then, the company has continued building, which is evident in its ability to exploit the internal and external environmental factors in the form of strengths and opportunities. However, internal conflicts have emerged and started to rock the business, especially on issues of safety and engagement. The CEO controls most of the critical decisions by the company, even when other internal stakeholders may remain opposed to some decisions (Ortutay, 2021; Warzel and Mac, 2018). Colleagues at the company become angry, frustrated, and feel powerless about the current situation where Facebook sidelines or sidesteps solutions to problems if they seem to conflict with his push for more profitability.

Similar issues are encountered externally, with legal and political battles in courts and Congress. Zuckerberg has made headlines multiple times on multiple occasions, including in 2020 when Facebook was to face the biggest legal battle ever (Neate, 2020). He has also been grilled by senators on such issues as Facebook’s effects on the well-being of children (Murphy, 2021). In all these external pressures, it has remained apparent that the company is keen to continue pursuing its corporate strategy of growth through building and expansion through acquisitions. Besides the political and legal environment, other external factors have also affected the company and the decisions made by its CEO. The rising competition from other social media giants forces the company to continue expanding and acquiring other businesses. From a socioeconomic perspective, the growing number of users creates further expansion.

The CEO manages these issues using different components of the business framework. These include the mission statement, which was changed in 2017 to emphasize more on building as opposed to the previous idea of sharing. The value proposition has thus changed from user orientation to financial incentives for the company. Regarding the external environment, the CEO seems to have no framework for addressing the concerns. Despite court and congressional hearings, the company continues to pursue its growth objectives and ignores the calls from both the government and users to address privacy issues currently rocking the company. Zuckerberg also fails to slow down with the acquisitions despite the multiple antitrust hearing.

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Strategic Tools/Models/Techniques

Zuckerberg has deployed several strategic tools and techniques to facilitate its growth and success. The term strategy tool has been described by Qehaja, Kutllovci, and Pula (2017, p. 68) as any generic model, method, tool, technique, technology, approach, or framework used to facilitate strategy implementation. Porter’s generic strategies are often used by firms whose focus is on competitiveness. Such a statement has been made by Islami, Mustafa, and Latkovikj (2020, p. 1), who affirms that Porter’s generic strategies work well in businesses that work in competitive environments. Facebook may be one of the largest social media brands across the world. However, this does not mean that the firm completely dominates social media. For example, Twitter is a common brand across the world, and with TikTok’s emergence and rapid growth, Facebook faces extremely stiff competition. From its conception, Facebook has had to deal with the presence of other platforms. According to Press (2018), this environment has helped Facebook to develop a long list of business and technical mistakes to avoid. In this case, it can be argued that of Porter’s generic strategies, differentiation has kept Facebook a competitive establishment.

Product differentiation works by making a product stand out among others in the competitive environment. A tale of how Facebook has used differentiation has been presented by Mohammed (2020), who argues that the journey towards this strategic goal is to start small and build big. In other words, the process begins with the identification of a niche market and developing a distinctive product that dominates that market. narrower markets allow quick progression, from which outward expansion can take place. In this case, it can be difficult to refer to Facebook as a business serving a niche market due to its broad range of product lines and users. However, Mohammed (2020) argues that Zuckerberg targeted and still targets the millennials due to their inherent nature of easily embracing new technologies. Therefore, Facebook has become a millennial product that remains a favourite among younger users.

Lastly, cost leadership is another key generic competitive strategy adopted by Facebook. This strategy allows the CEO to push for products that can be offered at competitively lower prices (Greenspan, 2018). The business model means that social media strategies can be offered across a global market as long as the users can access the internet. The users can register and use the platforms freely. However, other commercial services, including advertising, can be offered at the lowest possible prices to consumers.

Strategic Planning

Strategic planning is considered to be one of the most popular approaches by management in contemporary organizations. It comprises such elements as examining the mission, mandate, and values; internal and external environment; strategy identification, formulation, and implementation; and a plan for addressing emerging issues (George, Walker, and Monster, 2019, p. 810). Strategic planning at Facebook is manifested by the company’s mission statement, which outlines the long-term goal of the company. Between 2004 and 2016, the mission statement was to help friends and families share pictures, stories, and events by making the world more connected and open. From 2017, the mission changes to building communities by giving people the ability to build communities and bringing the world closer together (Najar, 2019). Facebook’s strategic planning meant that the firm started and focused almost mainly on acquiring users as opposed to the conventional strategies of getting straight to revenue generation.

The need to keep building a unique and valuable platform has been expressed by the CEO on several occasions. For example, Levy (2020) states that Zuckerberg believes that even though not everything the company builds is for everyone, anything that attracts tens or hundreds of millions of users will have created unique value that competitors may not be able to build. The mission statements presented above are evidence the company’s strategic planning involved laying a strong foundation, from which it can build a successful business. Therefore, Zuckerberg realizes that the communities themselves are a critical source of revenue, which means that larger and more communities offer greater revenue potential. As such, requiring users to pay may become a barrier to this goal of increasing the user base. Facebook’s strategic plan is that alternative sources of revenue can be exploited, including advertisement. According to Franek (2021), advertisement on Facebook comprises an estimated 98% of the company’s revenue, which reached $86 billion in 2020. Tools offered for free attract billions of users, which attracts marketers willing to pay hefty amounts for advertisements.

Evidence of the current strategic planning by Zuckerberg is manifested in the vision for the future and the goals set in pursuit of the vision. These are presented in what has been dubbed Facebook’s 10-year master plan, which comprises highly ambitious plans that Facebook seeks to bring to reality (Desjardins, 2017). These include solar-powered drones to beam internet access, satellite to provide Africa with the internet, hardware that boosts internet connectivity, and virtual or augmented reality headsets that resemble a normal pair of glasses.

Contemporary Strategic Issues

Business and corporate strategies have been discussed earlier, and these form two of the three levels of strategy. The third level is the functional level, which focuses on how the functional departments support the business-level strategies. Examples include human resources, marketing, research and development, and marketing (Bruin, 2020). At the functional level, the research and development at Facebook is arguably the most visible strategy, which is arguably directly connected to the innovation and technology strategies. Facebook is a tech company, which means that such efforts as new product development tend to combine emerging trends in technologies and innovations. In the 10-year master plan outlined earlier, examples of technology and innovation strategies are outlined by the novel ideas that Facebook seeks to pursue. Literature on innovation strategies often highlights the relationship between product innovation and firm performance (Schmuck and Benke, 2020, p. 1259; Ko et al., 2020, p. 1490). In this case, the Zuckerberg has used technology and innovation to build an international brand that dominates the social media market.

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Another contemporary issue in strategic management is the resource-based strategy and innovation. Literature on the resource-based view (RBV) highlights how firms use their core resources as a source of competitiveness (McDougal, Wagner, and MacBryde, 2019, p. 1366). Similarly, such scholars as Andersen (2021, p. 1) link RBV to product innovation, which means that businesses with better resources and capabilities become market leaders in innovation. In this case, Facebook has built resources and core capabilities that surpass competitors. As mentioned earlier, the IPO of Facebook was the biggest of any social media company. The funds are just a small part of the core resources that Facebook utilizes since the expertise employed by Zuckerberg plays a critical role in driving innovation. New product development at Facebook is evidence that the strategies deployed by the company are yielding positive results.

Lastly, the blue ocean strategy is an emerging issue that involves the deployment of methods and instruments that help a company achieve strategic objectives. As explained by (Rahman and Choudhury, 2019, p. 92), the blue ocean strategy is a theory that allows firms to think and invent innovation for future businesses while helping the company support the economic and financial objectives. The 10-year master plan developed by Zuckerberg is a perfect example of how the company pursues this strategy, especially considering the proposed technologies are novel.

Corporate Examples and Literature

Facebook is a company that has used multiple strategies to facilitate its growth and success. A unique business model has made the company lucrative, which has been founded on Facebook’s corporate strategy of growth. The strategy revolved around building a large user base and monetizing such aspects as advertisements. Other sources of revenue for the company may include services and products outside the social media platform. However, such instruments as gaming are increasingly becoming a core part of Facebook’s business strategy (Larson and Vieregger, 2019, p. 98). At the core of this corporate strategy is that people have to be connected through interactive technologies that facilitate real-time sharing. The intensity of connection is founded on the premise that engaging people who would otherwise remain unengaged creates a market from people who use the systems for free (Wu, 2021). It can be argued that such strategic models are unconventional considering that most tech businesses actively seek to monetize the systems and infrastructure they build.

Much of the literature concerning social media sites often focus on how other businesses use the sites as strategic tools for such functions as marketing. It can be argued that most of the social media platforms have built their platforms to allow businesses to exploit the opportunities availed to them. This is a case of rewarding user experience as described by (Bitrian, Buil, and Catalan, 2021, p. 170), who posits that mobile apps lead to positive marketing outcomes. In this case, Facebook allows marketers to develop apps that can be used with the Facebook platform. Overall, the strategic approach to Facebook’s business model is the cornerstone of the company’s growth and success.

Recommendations

Facebook needs to sustain its position, which means it has to maintain its competitiveness within the social media industry. In this case, most of the strategies explored have worked extremely well in facilitating the continuous rise of the company. However, the internal and external environmental analysis shows a major problem that may devastate Facebook if not properly handled. In other words, the political and legal challenges are a sign that the company’s image could easily be damaged. The underlying problem is that of user privacy and how Facebook handles user data. Users are increasingly becoming aware of the risks involved when their privacy is breached. The reputation of Facebook may swiftly change from a dominant social media platform to the greatest threat to privacy. From a business perspective, reputation is important for a firm that seeks to continuously attract customers. According to Pires and Trez (2018, p. 48), corporate reputation is indeed a critical resource that helps a company generate a competitive advantage. Therefore, the CEO should address all privacy issues before the company loses to competitors.

The damage to Facebook’s reputation is further affected by its aggressive expansion strategy, which majorly involves acquiring some of the key competitors. Some of the acquisitions have been criticized publicly because they are seen as moves based on monetizing user data. For example, the news of the acquisition of WhatsApp was not well-received by many who believed that WhatsApp offered what Facebook did not: guaranteed privacy. WhatsApp did not use client data for advertisements, which is expected to change after the acquisition. Therefore, Facebook has labelled itself as a company that is keen to disrupt the core benefits offered by competitors by acquiring them. All the social media sites purchased by Facebook can now be expected to pose the same privacy threats as the Facebook platform itself. Therefore, it is recommended that Zuckerberg should adopt different approaches to some of the acquisitions and sustain the privacy they were designed to offer.

Reference List

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