Facebook Inc. PESTEL/PESTLE Analysis & Recommendations

Facebook PESTEL PESTLE analysis, political, economic, sociocultural, technological, ecological, legal external factors 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. A PESTEL/PESTLE analysis of Facebook Inc. stresses reforms for global expansion and innovation. (Photo: Public Domain)

Facebook Inc. evolves to address the issues identified in this PESTEL/PESTLE analysis of the social media business. The PESTEL/PESTLE Analysis model presents an external analysis of the most important factors in the company’s remote or macro-environment. As one of the top players in the international social media market, the corporation has the capabilities to maintain such market position through popularity, brand development, and research and development investment. However, this PESTEL/PESTLE analysis of Facebook indicates the need for adjustments in 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 Twitter Inc., Snap Inc. (Snapchat), and Google’s YouTube. Considering the industry landscape and level of competition determined in the Porter’s Five Forces analysis of Facebook Inc., it is essential to implement strategies that strengthen the company’s competitive advantages to support continued growth worldwide.

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 the company to address issues in the industry, particularly political and technological factors. Strategic alignment with the conditions of the industry environment helps in satisfying Facebook’s corporate vision and mission statements, especially in providing effective tools for communication in the global social networking market.

Political Factors Affecting Facebook’s Business

Facebook’s business is linked to 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. Political movements have the power to shape the progress of businesses and entire industries. 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)
  4. Political action on online data (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 global growth is limited because of Chinese censorship. In addition, regarding data privacy and security issues involving organizations like Cambridge Analytica, governments are increasingly working to limit online data collection, sharing, and processing. This external factor can slow down the company’s growth. Based on this element of the PESTEL/PESTLE analysis of Facebook Inc., the company must enhance data privacy and security, and 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 trends and conditions on the firm’s remote or macro-environment. The economic external factors that affect the company 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. In this PESTEL/PESTLE analysis, such an external factor supports an expansion of access to Facebook’s social network. Moreover, the increasing disposable incomes in developing countries improve users’ capacity to purchase devices to access the company’s services, thereby also contributing to business expansion. Such conditions support Facebook’s generic competitive strategy and intensive growth strategies. This element of the PESTEL/PESTLE Analysis indicates that Facebook Inc. has major opportunities to expand its multinational 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 the services that they use. In the context of this PESTEL/PESTLE analysis, such a 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 worldwide creates opportunities for Facebook to develop additional services to profit from retail sales generated through its social networking website and related mobile apps. For example, the company can offer better marketplaces to address this trend. The company also has the opportunity to enhance its corporate social responsibility programs as a way of satisfying the 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 involving its mobile apps. This opportunity is based on the trend of increasing mobile device usage worldwide. However, this PESTEL/PESTLE analysis points to the threat of increasing competition, as more online social networks attempt to attract users away from the company’s social media services. This technological trend also leads to market saturation, which is a threat noted in the SWOT analysis of Facebook Inc. Furthermore, the diversification of online retail firms threatens to compete with the company. 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 influence the company:

  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 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 business to transfer its servers and other equipment to another location in the future. Improving Facebook Inc.’s corporate social responsibility standing can help address the external factors shown in this element of the PESTEL/PESTLE analysis.

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)
  4. Increasing regulation on online data (threat)

Facebook Inc. has the opportunity to innovate and introduce new products, with the expectation of legal protection based on improving patent laws around the world. In addition, this PESTEL/PESTLE analysis points to the increasing coverage of free Wi-Fi as a beneficial trend. For example, based on this external factor, the company can expand its social media reach in more 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. Online data collection, sharing and processing regulation markedly increased in the aftermath of the Cambridge Analytica scandal and related issues in 2018. This external factor threatens the company and the online display advertising industry. Overall, 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.

PESTEL/PESTLE Analysis of Facebook Inc. – 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. The company needs strategies to protect the business from the threats identified in this external analysis. For example, management and strategies need to address the threat of governmental crackdown and corresponding regulation on online data collection and processing. Such issues require strategic management measures that recognize the urgency of governmental and regulatory implementations.

It is recommended that Facebook Inc. address issues with China’s government to penetrate the country’s social media market, which is among the biggest in the world. The objective is to have the ban on the social network lifted. Another recommendation is that the company should develop new products that support online retailers to create new revenue streams for the corporation. Moreover, based on this PESTEL/PESTLE analysis, it is recommended that Facebook diversify its business. Diversification can reduce the firm’s market risk exposure.

References