11/11/2010

Strategic Audit
Facebook

Submitted By:
 MARYAM SHABBIR 7643-FMS-MBA-S17
 RABIA MUSHTAQ 7671-FMS-MBA-S17
 RIDA NASEEM 7645-FMS-MBA-S17
 EESHA KAISER 7681-FMS-MBA-S17
 MEHWISH AFZAL 7679-FMS-MBA-S17
 Table Of Content
I. CURRENT SITUATION……………………………………………………………………………….3
A. CURRENT PERFORMANCE…………………………………………………………..........3
B. STRATEGIC POSTURE……………………………………………………………………..…4
MISSION………………………………………………………………………………………4
OBJECTIVES…………………………………………………………………………………4
STRATEGIES………………………………………………………………………………...4
POLICIES……………………………………………………………….……………………..4
II. STRATEGIC MANAGERS…………………………………………………………………………...4
A. BOARD OF DIRECTORS……………………………………………………………………..4
B. TOP MANAGEMENT…………………………………………………………………………..5
III. EXTERNAL ENVIRONMENT:……………………………………………………………………5
A. NATURAL ENVIRONMENT…………………………………………………………………5
[Link] ENVIRONMENT………………………………………………………………….5
ECONOMIC…………………………………………………………………………………..5
TECHNOLOGY…………………………………………………………………….………..5
POLITICAL-LEGAL……………………………………………………………………….5
SOCIO-CULTURAL………………………………………………………………………..5
[Link] ENVIRONMENT………………………………………………………………………..6
IV. INTERNAL ENVIRONMENT……………………………………………………………………..6
A  CORPORATE STRUCTURE………………………………………………………………….……….6
B. CORPORATE CULTURE……………………………………………………………………..….……..6
C.  CORPORATE RESOURCES…………………………………………………………..………….6
MARKETING…………………………………………………………………………………..7
FINANCE……………………………………………………………………………………….7
R&D………………………………………………………………………………………………7
OPERATIONS…………………………………………………………………………………7
HUMAN RESOURCES……………………………………………………………………...7
INFORMATION SYSTEMS……………………………………………………………….7
A. SITUATIONAL ANALYSIS……………………………………………………..……………7
STRENGTHS…………………………………………………………………………………….8
WEAKNESSES……………………………………………………………………………….…8
OPPORTUNITIES ………………………………………………………………………..8
THREATS…………………………………………………………………………………………8
VI. STRATEGIC ALTERNATIVES AND RECOMMENDED STRATEGY……….………9
VII. IMPLEMENTATION……………………………………………………………………………….9
VIII. EVALUATION AND CONTROL………………………………………..……………………..9
EFAS …………………………………………………………………………………………………………..10
IFAS…………………………………………………………………………………………………………….11
SFAS…………………………………………………………………………………………………………...12
RATION ANALYSIS…………………………………………………………………………………...…13
COMMOM-SIZE INCOME STATEMENT…………………………………………………..........14

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  Facebook Strategic Audit
Facebook, Inc. is an American online social media and social networking service company
based in Menlo Park, California. It was founded in 2004 by Mark Zuckerberg, along with
fellow Harvard College students and roommates Eduardo Saverin, Andrew McCollum, Dustin
Moskovitz and Chris Hughes.

I. Current Situation

A. Current Performance

"Despite facing important challenges, our community and business are off to a strong start in
2018," said Mark Zuckerberg, Facebook founder and CEO. "We are taking a broader view of
our responsibility and investing to make sure our services are used for good. But we also need
to keep building new tools to help people connect, strengthen our communities, and bring the
world closer together."

First Quarter 2018 Operational and Other Financial Highlights

 Daily active users (DAUs)–DAUs were 1.45 billion on average for March 2018, an
increase of 13%year-over-year.

 Monthly active users (MAUs)–MAUs were 2.20 billion as of March31, 2018, an

increase of 13% year-over-year.

 Mobile advertising revenue –Mobile advertising revenue represented approximately

91% of advertising revenue for the first quarter of 2018, up from approximately 85% of
advertising revenue in the first quarter of 2017.

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  Capital expenditures –Capital expenditures for the first quarter of 2018 were $2.81
billion

B. Strategic Posture:

1.  Mission

 Facebook’s corporate mission is “to give people the power to build community
and bring the world closer together.” (Annual Report 2017)
 The following are the major components of Facebook’s mission statement:
 Empowering people
 Enabling community building
 Connecting the world

2.  Objectives

 Global wireless infrastructure and provide digital marketing to deliver positive ROI.
 Facebook’s main functional objective is social networking an integrating the world into
an intermodal connected entity.

3.  Strategies

 For Facebook, a major priority is to bring people on board who fit the culture and
values of the company and who have the right attitude and skills to make strategic
decisions.

 Mark Zuckerberg’s main strategic plan is to have a 10-year time frame from which the
company can provide Internet access to at least two-thirds of people on the planet who
are not connected.

4. Policies

 Facebook enables global economic activity by helping to unlock new opportunities

through connecting people and businesses, lowering barriers to marketing, and
stimulating innovation.

II. Strategic Managers

 A. Board of Directors

 Thirty members---Well respected Americans

 Mark Zuckerberg Founder, Chairman and CEO, Facebook

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B. Top Management

 Sheryl Sandberg, Chief Operating Officer

 David Wehner, Chief Financial Officer
 Mike Schroepfer, Chief Technology Officer

III. EXTERNAL ENVIRONMENT: OPPORTUNITIES AND THREAT (SWOT)

A.    Natural Environment

A small carbon footprint.

 Most of Facebook’s emissions are from the company’s American data centres.
However, it’s been rather low over the last few years, compared to other companies.

 Facebook still uses coal power to generate power in the data centres.

 They also use gas and nuclear as well. They should put more effort into using
renewable energy systems to cut their carbon footprint further. It will put less strain on
the environment as well.

B.   Societal Environment:

      Economic

 Increasing stability of developing countries (O)

 Rapid economic growth of developing countries (O)
 Increasing disposable incomes (O)

Technology

 Increasing use of mobile devices (O)

 Increasing number of online social media companies (T)
 Diversification of online retail firms (T)

Political-Legal

 Political stability in developed countries (O)

 Popular governmental support for globalization (O)
 Political barriers in the Chinese market (T)
 Political action on online data (T)

       Socio-cultural

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  Increasing preference for high quality services (O)
 Increasing online buying (O)
 Increasing support for corporate social responsibility (O)

C. Task Environment

 Among the hundreds of online social media sites on the Internet, sites that compete
directly with Facebook (FB) include Instagram, Snapchat (SNAP), and LinkedIn
(LNKD). These social media companies continue to grow their audience and
expand reach.. However, this Five Forces analysis shows that the Facebook must keep
satisfying customers to reduce the potential negative effects of competition and
substitution against its social networking website, mobile apps, and related offerings.

 Competitive rivalry or competition (moderate force)(T&O)

 Bargaining power of buyers or customers (strong force)(T)
 Bargaining power of suppliers (weak force)(O)
 Threat of substitutes or substitution (strong force)(T)
 Threat of new entrants or new entry (weak force)(O)

IV. Internal Environment

A  Corporate Structure

 Corporate Function-Based Teams(S)

 Geographic Divisions(S)
 Product-Based Divisions(S)

B. Corporate Culture

The company supports social media and online advertising service enhancement. Also,
Facebook Inc.’s organizational structure affects the company’s workforce development.
Human resources are developed and maintained through training that ensures talent and skills
for the company’s aims in creativity and innovation for its social media business. The
following characteristics are the most notable in Facebook’s organizational culture:

 Creative problem solving and decision-making(S)

 Boldness(S)
 Openness(S)
 Speed(S)

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  Continuous improvement(S)

C.  Corporate Resources

Marketing

 Facebook is an effective marketing tool where businesses can reach out large number
of customers in a short time period. (S)

 Promotion through Facebook is cost effective. (S)

Finance

 Facebook revenue for the quarter ending March 31, 2019 was $15.077B, a 26%
increase year-over-year.(S)
 Facebook revenue for the twelve months ending March 31, 2019 was $58.949B, a
32.21% increase year-over-year.(S)
 Facebook annual revenue for 2018 was $55.838B, a 37.35% increase from 2017.(S)
 Facebook annual revenue for 2017 was $40.653B, a 47.09% increase from 2016.(S)
 Facebook annual revenue for 2016 was $27.638B, a 54.16% increase from 2015.(S)

R&D

 Facebook spend 30% of all the revenue on research and development. (S+T)

 Focusing on expansion and development of new projects. (S)

Operations

 A Facebook activity log lists all social activity in chronological order, including posts,
likes, followers, mentions, and more. Activity log also allows users to manage what is
visible on their page.. (S)

 We remain committed to serving the needs of our members by managing schedule

posts ,monitoring the conversation ,dealing with posts and comments. (S)

Human Resources

 Employees are called associates. (S)

 Employees are a high value corporate asset.(S)

 WOW features that provide employees' amazing choices.(S)

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  Its management approach focuses on speed and risk-taking(S).

 A focus on excellence in recruiting.(S)

Information Systems

 Leader in RFID(Radio-frequency identification) technology. (S)

 Good Internet presence. (S)

V.  Analysis of Strategic Factors

A. Situational Analysis

Strengths

 Highly skilled workforce through successful training and learning programs.

 Strong dealer community

 Integration with websites and applications
 More than a billion active monthly users
 Excellent users experience
 Understanding of user’s needs and behaviour.
 Strong brand image
 Large consumer base with externalities
 High revenues
 Innovative workforce

Weaknesses

 Weak CTR(click-through rate) of advertisements

 Social network lacks of some features
 One source of revenues – advertisements on Facebook
 Attitude towards users’ privacy
 Lack of website customization
 Weak protection of users’ information
 Negative impacts of online advertising on user experience
 Low diversification of business

Opportunities

 Increasing number of people using Facebook through mobile devices

 Expansion to China
 Diversify sources of revenue

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  Open Facebook marketplace
 Business diversification
 Product innovation
 Market penetration and development


Threats

 Increasing number of mobile internet users

 Users using ad-block extensions
 Slow growth rate of online advertising
 Identity thefts
 Weak business model.
 Imitation
 Cybercrime
 Market saturation

VI. Strategic Alternatives and Recommended Strategy

A. Strategic Alternatives

 Pro. Improved customer service

 Pro. Business growth
 Pro. Stronger relationships with its customers
 Con. The negative image tarnishes their moral and ethical image.

B. Recommended Strategy

 It is recommended that Facebook diversify its business to minimize market risk

exposure while exploiting possible additional sources of revenues to keep the
organization growing. Another recommendation is that the company must continue its
research and development (R&D) investments to increase its capabilities in
counteracting cybercrime that victimizes users of social media services. The business
must also continue its efforts in negotiating with governments to open up markets
where it currently has minimal or no presence.

VII. Implementation

 Facebook’s generic strategy ensures growth and competitive advantage through the
social network’s features and ease of access to capture a bigger share of the market,
addressing competition against companies like Google, Twitter, and Snapchat, which
have significant presence in the online advertising market.

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  The company uses computing technologies to maximize the efficiency of its social
networking website. The online nature of this business enables Facebook to easily
reach Internet users across the international market, thereby satisfying the broad
competitive scope of the cost leadership generic strategy.

 Facebook Inc. developed mobile apps to complement the social networking website.
The company continues to develop new product offerings. This intensive strategy
influences Facebook’s marketing mix or 4Ps. New products attract more individual
users and advertisers, which are the main source of the company’s revenues.

VIII. Evaluation and Control

 Facebook conducts performance reviews every six months to formally collect insights
from an employee's managers and closest colleagues.
 At Facebook, these reviews are checkpoints rather than investigative, revealing
evaluations. "They do it twice a year because the business moves very quickly and our
product moves very quickly, and if you wait a whole year, a lot of things have
changed," Goler said.
 These evaluations can be used to determine new responsibilities for an exceptional
employee, which can then lead to a subsequent compensation discussion. But they
aren't used to decide that an underperforming employee should be fired, Goler said,
since managers would ideally not allow poor performance to persist until a formal
meeting.

EFAS (External Factor Analysis Summary)

Weight Rating Weighted

Key Internal Factors Scores
Opportunities

Diversification of revenue source 0.17 4 .70

Investment in data protection and 0.17 4 .70

user privacy protection

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 Entering Chinese market via 0.17 4 .70
negotiations with the government

Formation of strategic alliances 0.17 4 .70

Threats

Cyber-attacks, phishing and threats to 0.09 2 .17

online security

Facebook may not be able to 0.04 1 .04

successfully integrate new business it
acquires

Increasing popularity and 0.09 2 .17

sophistication of ad-block extensions

The threat of being banned in 0.09 2 .17

developing countries

Total Scores 1.0   3.34

IFAS (Internal Factor Analysis Summary)

Key Internal Factors Weight Rating Weighted Scores

Strengths

Market leadership in the global scale 0.22 4 .89

Efficient capitalization on mobile advertising 0.22 4 .89

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 Evolving role as a news source 0.22 4 .89

Weakness

Dependence of revenues only on advertising 0.11 2 .22

Challenges to sustain the revenue growth rate 0.11 2 .22

Dependence of the business on a few key 0.11 2 .22

personnel

Total Scores 1.0 3.33

SFAS (Strategic Factor Analysis Summary)

Weight Rating Weighted Duration           S         I         L

Key Strategic Score
Factors
Efficient capitalization .15 4 .60  X  X    X
on mobile advertising.
(S)

Market leadership in .15 3 .45  X    X

the global scale.(S)

Challenges to sustain .20 3 .60  X  X    X

the revenue growth
rate.(W)

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Dependence of .20 3 .60  X  X    X
revenues only on
advertising.(W)

Diversification of .10 2 .20  X  X    X

revenue source.(O)

Investment in data .15 4 .60  X  X  X

protection and user
privacy protection.(O)

Cyber-attacks, .05 3 .15

phishing and threats
to online security.(T)

Facebook may not be

able to successfully
integrate new
business it acquires.
(T)

TOTAL SCORES 1.00 3.20      

Ratio Analysis for Facebook (2015-2018)

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Common size Income Statement for Facebook (2015-2018)

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