Facebook Inc. PESTEL/PESTLE Analysis, Recommendations

Facebook Inc. PESTEL PESTLE analysis, political economic sociocultural technological ecological legal external social media case study
Petty Officer 3rd Class Barajas looks at photos of her children on Facebook while on a break in her deployment to Southern Afghanistan in 2010. Facebook Inc.’s PESTEL/PESTLE Analysis stresses reforms for global expansion and innovation. (Photo: Public Domain)

Facebook Inc. evolves to address the issues identified in its PESTEL/PESTLE analysis. The PESTEL/PESTLE Analysis model presents an external analysis of the most important factors in the company’s remote or macro-environment. As the top player in the social media market, Facebook Inc. has the capabilities to maintain its market position through popularity, brand development and R&D investment. However, a PESTEL/PESTLE analysis of Facebook indicates the need for adjustments in its strategies to ensure that its social networking website, mobile apps, and display advertising services remain attractive in the face of significant competition from other firms, such as Google Inc. [READ: Google Inc.’s PESTEL/PESTLE Analysis]

A PESTEL/PESTLE analysis of Facebook Inc. identifies the external factors that significantly influence the condition of the firm’s remote or macro-environment. These external factors require Facebook to address issues in the market, especially political and technological factors.

Political Factors Affecting Facebook’s Business

Facebook’s business relates with the political landscape. In this element of the PESTEL/PESTLE Analysis, the effects of governments as external factors in the company’s remote or macro-environment are determined. The following are the major political factors influencing Facebook Inc.:

  1. Political stability in developed countries (opportunity)
  2. Popular governmental support for globalization (opportunity)
  3. Political barriers in the Chinese market (threat)

The political stability of developed countries presents opportunities for Facebook Inc. to continue diversifying its business in these markets. Also, the company has the opportunity to expand its social media and display advertising services worldwide, based on governmental support for globalization. However, Facebook could suffer from political barriers in China. The company’s potential significant global growth is limited because of Chinese censorship. Based on the external factors in this element of the PESTEL/PESTLE analysis of Facebook Inc., the firm must continue negotiating with the Chinese government to open up the display advertising market in the country.

Economic Factors Important to Facebook Inc.

Economic conditions shape Facebook Inc.’s business growth. This element of the PESTEL/PESTLE Analysis considers the impact of economic changes and conditions on the firm’s remote or macro-environment. The economic external factors that affect Facebook Inc. are as follows:

  1. Increasing stability of developing countries (opportunity)
  2. Rapid economic growth of developing countries (opportunity)
  3. Increasing disposable incomes (opportunity)

Facebook Inc. has the opportunity to increase its market penetration efforts in developing countries with increasing economic stability. In relation, the rapid economic growth of these countries leads to an improvement of infrastructure, including telecommunications infrastructure. This external factor supports an expansion of access to Facebook’s social networking website and social media services. Moreover, the increasing disposable incomes in developing countries improve users’ capacity to purchase computing devices that could access Facebook’s services, thereby also contributing to the company’s expansion. Such conditions support Facebook’s generic and intensive growth strategies. This element of the PESTEL/PESTLE Analysis indicates that Facebook Inc. has major opportunities to expand its global operations, especially through market penetration.

Social/Sociocultural Factors Influencing Facebook’s Business Environment

Facebook’s popularity and global reach is under the influence of social conditions. The impact of sociocultural trends and changes on the company’s remote or macro-environment is determined in this element of the PESTEL/PESTLE Analysis. The following sociocultural external factors are most notable in the case of Facebook Inc.:

  1. Increasing preference for high quality services (opportunity)
  2. Increasing online buying (opportunity)
  3. Increasing support for corporate social responsibility (opportunity)

With increasing financial capacity and improving living conditions, people are increasingly emphasizing high quality in service. This social condition presents an opportunity for Facebook Inc. to improve its service quality standards to satisfy and retain clients who pay for the company’s display advertising services. In addition, increasing online buying behaviors worldwide create opportunities for Facebook to develop additional services to profit from retail sales generated through its social networking website and related mobile apps. The company also has the opportunity to enhance its corporate social responsibility programs as a way of satisfying corresponding expectations of users. Based on the external factors in this element of the PESTEL/PESTLE analysis of Facebook Inc., there are major opportunities to improve the company’s services to optimize competitive advantage.

Technological Factors in Facebook’s Business

Technologies impact Facebook Inc., considering that it is a business founded on online technologies. This element of the PESTEL/PESTLE Analysis identifies the main technological influences on the firm’s remote or macro-environment. The following technological external factors affect Facebook Inc.:

  1. Increasing use of mobile devices (opportunity)
  2. Increasing number of online social media companies (threat)
  3. Diversification of online retail firms (threat)

Facebook has the opportunity to improve user experience in using its mobile apps. This opportunity is important, especially because of the trend of increasing mobile device usage worldwide. However, Facebook Inc. faces the threat of increasing competition, as more online social media companies attempt to get established and attract users away from the company’s social media services. Also, the diversification of online retail firms threatens to compete with Facebook. For example, giants like Amazon.com is in a position to offer online advertising services through its network of affiliate websites. This element of the PESTEL/PESTLE Analysis shows that Facebook Inc. must continue improving its social media and display advertising services to retain customers.

Ecological/Environmental Factors

Facebook’s social media business is partly linked to the natural environment. The effects of ecological issues and trends on the company’s remote or macro-environment are determined in this element of the PESTEL/PESTLE Analysis. The following ecological external factors significantly influence Facebook:

  1. Increasing emphasis on business sustainability (opportunity)
  2. Increase complexity of waste disposal standards (opportunity)
  3. Climate change (threat & opportunity)

Facebook Inc. has the opportunity to enhance its social media business sustainability condition to satisfy concerns regarding the natural environment. Also, the company can implement better waste disposal policies and standards for its corporate operations. Such effort can address the increasing complexity of waste disposal standards, especially in Western countries. Facebook faces the threat of climate change, which could prompt the company to transfer its servers and other equipment to another location in the future. Based on the external factors in this element of the PESTEL/PESTLE analysis of Facebook Inc., the organization must continue improving its corporate social responsibility standards and policies.

Legal Factors

Laws impose requirements and limits on Facebook’s business. This element of the PESTEL/PESTLE Analysis covers the effects of legal systems and regulations on firms’ remote or macro-environment. The legal external factors notable in Facebook’s case are as follows:

  1. Improving patent laws worldwide (opportunity)
  2. Increasing regulatory support for free Wi-Fi (opportunity)
  3. Internet regulation in China (threat & opportunity)

Facebook Inc. has the opportunity to innovate new products and introduce these products worldwide, while expecting improving legal protection, based on improving patent laws around the world. In addition, the company can benefit from the increasing coverage of free Wi-Fi by expanding its social media reach in many areas worldwide. However, Facebook suffers from its ban in China. Nonetheless, the firm has the opportunity to adjust its services and negotiate with the Chinese government to gain access to the country’s online social networking market. This element of the PESTEL/PESTLE Analysis shows that legal external factors mainly provide opportunities that Facebook Inc. could take to expand its operations and market reach.

Facebook Inc.’s PESTEL/PESTLE Analysis – Recommendations

This PESTEL/PESTLE analysis of Facebook Inc. stresses the importance of strategic reforms to address major opportunities in the global social media and online advertising market. It is recommended that the company must address issues with the Chinese government and make suitable adjustments to its social media services. The objective should be to have the ban lifted so that Facebook could grow and benefit from penetrating the Chinese market. Another recommendation is for Facebook Inc. to develop a new product that supports online retailers to create a new revenue stream for the company. Moreover, based on this PESTEL/PESTLE analysis, it is recommended that Facebook must diversify its business. Diversification should help reduce the firm’s market risk exposure.

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