STRATEGIC MANAGEMENT

CASE ANALYSIS

Jio and Facebook: Adding Value through an Alliance

Q1 What were FB and Jio’s Growth Strategy?

Facebook-

At the time of the alliance Facebook had become a global giant having presence in Asia-
Pacific, Europe, Africa, Middle East, and the Americas. It used an intensive growth strategy
by diversifying its product portfolio with the main aim of establishing new businesses. It
would acquire or establish new subsidiaries or businesses in order to increase its revenue and
market reach. For instance, Facebook had acquired Oculus VR so that it could offer VR
technology that would complement its social networking services. Acquisitions were a key to
Facebook’s business as well as revenue growth. Its strategy was to acquire potential rivals
before they could become too big. Facebook had already acquired WhatsApp, Instagram,
Oculus VR, Onavo, and Beluga in the past nine years. Apart from acquiring its potential
rivals, Facebook was also investing heavily in small businesses that showed future growth.

Jio-

Jio made use of the bait and hook model by offering the basic product at low cost or free in
order to bait the customers and selling complementary products at comparatively higher
prices which acted as a hook. For instance, it gave out free 4G sim cards with free phone
calling, data, OTT services which made the customers switch to Jio’s ecosystem by
purchasing 4G voice over long term evolution (VoLTE) handsets. Also, once the customers
got used to Jio, it gradually increased the prices of its services.
Jio was able to gain market share quickly due to its penetration pricing strategy. Whenever it
would launch a new product, it would charge a very low price with the objective of
increasing it at the end of the promotional period, after the company had gained substantial
market share.
Q2 Why Jio and Facebook entered the strategic alliance?

The major reasons Facebook choose Jio alliance are:

Increase customer base in one of the largest markets in the world : Facebook has
previously grown its market share by forming partnerships with telecom companies,
increasing the number of people who used the Facebook mobile app and its other social
media services. With such a large customer base of Jio, Facebook has an opportunity to gain
new customers and even personalised data. Partnership with Jio would imply a more detailed
and localised understanding of Indian customers' purchasing habits. This could provide
Facebook with a new perspective on Indian consumers, bolstering its already formidable
advertising machine. Also, India's Facebook user base was anticipated to grow from 281
million in 2018 to 444.2 million in 2023.

Measure against Governmental risks: Facebook needed an Indian representative, and the
alliance it formed with Jio was a hedge against the political risks of entering India. The
government has started taking cases of security of sensitive data held by organisations
seriously and have scrutinized large tech companies. Having an alliance with Jio will help
Facebook to deal with such scenarios if they occur.

A way to enter the physical market space in India: Facebook can gain access to physical-
digital commerce by establishing an alliance with Jio. The recent announcement of
WhatsApp payments integrated with JioMart focusing on small kirana shops for digital
payments is an example of this hyperlocal approach

Taking advantage of 5G in India: Facebook is investing in products revolving around IoT

and virtual reality technology. These require high speed internet services, partnering with Jio
will provide them a way to allow Indian users to try these newer offerings
Q3. How Jio and Facebook may succeed in creating value through the strategic alliance?

 Penetrate the Unorganized Retail Sector –

By combining WhatsApp and the online grocery delivery platform JioMart, Facebook
was able to connect millions of consumers with local kirana stores and other small
businesses that remained the backbone of India's unorganised retail industry.
According to industry estimates, the target audience was anticipated to be around 60
million small enterprises across the country. This business concept was dubbed "new
commerce" by Reliance. Rather than viewing kirana stores as a threat, the strategy
strived for inclusive growth that incorporated them.

 Enable Social Commerce –

Facebook might help a budding social media marketplace link resellers, SMBs, and
micro-entrepreneurs with potential clients or buyers. This was not the first time
Facebook had expressed interest in this expanding group. It acquired a minority share
in Meesho, one of India's fastest-growing social commerce platforms, in 2019.

 Drive Digital Payments –

The agreement was also expected to assist Jio and Facebook in competing with digital
payment financial technology providers such as Walmart-owned PhonePe, Alibaba-
backed Paytm, Google Pay, and Amazon Pay in the Indian digital payment industry,
which was expected to grow fivefold to US$1 trillion by 2023. WhatsApp Pay will be
available in India on February 7, 2020. Despite regulatory concerns with data
localization, efforts were being made to obtain regulatory approval. The agreement
may enable WhatsApp Pay to compete with services like Google Pay, PhonePe, and
Paytm. According to Frost & Sullivan's research, WhatsApp will eventually allow
customers to pay for things purchased on JioMart.

 Expand Economic Opportunities –

This collaboration would broaden Facebook's commercial potential in India,
particularly its digital advertising platform. This collaboration boded well for India,
where WhatsApp was the most popular messaging programme. WhatsApp and
Facebook had aided in the provision of Internet access to millions, and their
collaboration would help to hasten the transition to digitization. This could have a
long-term positive impact on employment by creating new supply chain and delivery
jobs.

 Leverage India’s Internet –

Jio had created a long-term infrastructure. 5G and pan-India fiber-optic cable would
power broadband Internet in Indian homes and small and medium-sized businesses.
Facebook obtained a share in India's Internet and communications infrastructure as a
result of this agreement. In terms of the Facebook-Jio Platforms transaction, the two
companies might use each other's skills to create a hitherto unseen connected
ecosystem that includes payments, communications, and offline and online
commerce.