Facebook Inc. SWOT Analysis & Recommendations

Facebook Inc. SWOT analysis, strengths, weaknesses, opportunities, threats, internal, external factors, social media business case study
Chairman of the Joint Chiefs of Staff U.S. Army Gen. Dempsey during a Facebook Town Hall Meeting on Dec. 5, 2013. A SWOT analysis of Facebook Inc. shows the need for diversification of the social media business. (Photo: Public Domain)

Facebook Inc.’s strengths and weaknesses, as well as the opportunities and threats in the global social media and online advertising markets can be identified through a SWOT analysis of the business. A SWOT analysis identifies the internal strategic factors (strengths and weaknesses) and external strategic factors (opportunities and threats) significant to the business. In this case of Facebook Inc., such factors pertain to the dynamics of the online social networking environment and online advertising market. While Facebook remains one of the leading players in the market, this SWOT analysis highlights issues that the company must address to continue in its global market position. Also, the company must adjust its strategies and internal factors along with changes in the external factors that affect the business. In this way, Facebook can ensure that its weaknesses are contained and its strengths are sufficient to compete in the international market.

This SWOT analysis of Facebook Inc. indicates strengths that support the organization’s leadership in the online social media business. However, the company must continue innovating to ensure such market position, considering the threats facing its social networking and online advertising services. The business competes against firms like Google LLC, Snap Inc. (Snapchat), and Twitter Inc. These competitors influence the threats and opportunities that impact Facebook’s strengths and weaknesses.

Facebook’s Strengths (Internal Strategic Factors)

Facebook Inc.’s strengths support its market position as one of the biggest players in the social media market and the Internet advertising market. Such strengths are internal factors that build business competitiveness. This element of the SWOT analysis enumerates the company’s strengths and how they relate to business performance. The following are Facebook’s main strengths:

  1. Strong brand image
  2. Large consumer base with externalities
  3. High revenues
  4. Innovative workforce

Facebook Inc.’s social network’s popularity comes with a strong brand image, which is considered as strength in the context of this SWOT analysis. The company develops its business as a reliable social media service provider. In relation, the company’s large consumer base is a strength that brings a number of beneficial externalities. For example, the large number of users or members makes Facebook’s social networking website and mobile apps more attractive to potential new members, more attractive to advertisers, and more difficult for new social media companies to compete with. Moreover, high revenues are a beneficial internal strategic factor that supports the company’s financial capacity for research and development (R&D) investments for new products and new business ventures. Also, Facebook’s organizational culture contributes to innovativeness in the workforce. This internal factor enables product development, which is a growth strategy. Thus, this element of the SWOT analysis shows that Facebook Inc. has the strengths to maintain its competitive advantage and attractiveness in the online advertising market.

Facebook’s Weaknesses (Internal Strategic Factors)

The company suffers from a number of weaknesses based on the nature of its business. Social media and online advertising technologies create weaknesses that enable competition, which exerts a moderate force on firms in the industry (See Porter’s Five Forces Analysis of Facebook Inc.). In this element of the SWOT analysis, weaknesses are internal factors that prevent or reduce the company’s success. The following weaknesses affect Facebook Inc.’s long-term success:

  1. Imitable products and services
  2. Negative impacts of online advertising on user experience
  3. Low diversification of business

Facebook’s social networking website, mobile apps, and related services are imitable in terms of basic features. This SWOT analysis considers such internal strategic factor a weakness because it makes the company vulnerable to competition. For example, other companies can develop their social networking services to directly compete against Facebook Inc. Also, the company’s online advertising mechanism is a weakness because users could perceive advertisements as a nuisance in their social media experience. In addition, the corporation suffers from a low level of diversification, which maximizes market risk exposure. With low diversification, the vast majority of the company’s earnings are generated through its social networking website and related mobile apps. Based on this element of the SWOT analysis, Facebook Inc. must address its weaknesses to reduce market risk exposure, and to increase potential business growth.

Opportunities for Facebook Inc. (External Strategic Factors)

A number of opportunities are available for the company to grow its social media business internationally. This element of the SWOT analysis enumerates the external factors that the company can exploit to improve its business situation. The following opportunities are most relevant in Facebook Inc.’s case:

  1. Business diversification
  2. Product innovation
  3. Market penetration and development

Facebook Inc. has the opportunity to diversify outside its core social media and online advertising business. The company has taken steps to exploit this external factor. For example, the company acquired Oculus VR, which is a virtual reality technology business that can complement social networking services. However, this SWOT analysis points to the need for further diversification to reduce Facebook’s business risk exposure. Another opportunity is for the organization to innovate products that are complementary to its social networking website and mobile apps. Furthermore, market penetration and development can increase membership and revenues, in line with Facebook Inc.’s generic competitive strategy and intensive growth strategies. This element of the SWOT analysis indicates the need for the company to reform some of its strategies and management direction to ensure continuous growth.

Threats Facing Facebook Inc. (External Strategic Factors)

The company experiences risks linked to threats in the social media and online advertising industry environment. External factors that impede business growth are outlined in this element of the SWOT analysis. Facebook must address the following threats against its multinational business:

  1. Imitation
  2. Cybercrime
  3. Market saturation

Imitation is one of the major threats to the business, considering that other firms could develop social networking websites and mobile apps similar to those of Facebook. In this SWOT analysis, imitation is a threat because it has the potential to reduce the company’s market share. Also, with increasing membership, the company is now an attractive cybercrime target. This external strategic factor can negatively impact user experience and, consequently, business performance. Moreover, the market is increasingly saturated, as pointed out in the PESTEL/PESTLE analysis of Facebook Inc. Market saturation could lead to business growth plateau or stagnation. Based on this element of the SWOT analysis of Facebook Inc., it is crucial that the company develop new products and related technologies, and enter new businesses.

SWOT Analysis of Facebook Inc. – Recommendations

Facebook Inc. benefits from its market position in the social media business. However, this SWOT analysis points out a number of issues that the company must address to maintain its growth and profitability. For example, imitation enables other firms to compete in the online advertising industry. Also, Facebook is a prime target for cybercrime. These issues require strategic management initiatives to maintain the company’s status as an attractive venue for online communication and information dissemination.

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.

References
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  • Facebook Inc. – Form 10-K.
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