Facebook Inc. SWOT Analysis & Recommendations

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

Facebook Inc.’s strengths and weaknesses, as well as social media market opportunities and threats can be identified through a SWOT Analysis of the company. A SWOT Analysis identifies the internal strategic factors (strengths and weaknesses) and external strategic factors (opportunities and threats) significant to the business. In the case of Facebook Inc., these factors pertain to the dynamics of the online social networking environment and online advertising market. While Facebook remains the leading player in the social media market, this SWOT Analysis highlights issues that the company must address to continue in its market position.

A SWOT analysis of Facebook Inc. indicates strengths that support the organization’s leadership in the online social media business. However, Facebook must continue innovating to ensure such market position, considering the threats facing its social networking website and online advertising services.

Facebook’s Strengths (Internal Strategic Factors)

Facebook Inc.’s strengths support its market position as the biggest player in the social media market and as a major player in the online advertising market. The internal strategic factors that build business competitiveness are considered in this element of the SWOT Analysis. The following are Facebook’s main strengths:

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

Facebook’s social networking website’s popularity comes along with a strong brand image. The company has developed its business as a reliable social media service provider. In relation, Facebook Inc.’s large consumer base is a strength that brings along a number of beneficial externalities: The large number of users or members makes Facebook’s social networking website more attractive to potential new members, more attractive to advertisers, and more difficult for new social media companies to compete with. Moreover, with its high revenues, the company has the financial capacity for research and development (R&D) investments for new products, and investments in new business ventures. This element of the SWOT analysis shows that Facebook Inc. has the necessary strengths to maintain its competitive advantage and attractiveness in the online advertising market.

Facebook’s Weaknesses (Internal Strategic Factors)

Facebook suffers from a number of weaknesses based on the nature of its social media business. This element of the SWOT Analysis identifies the internal strategic factors that prevent or reduce the company’s success. In Facebook’s case, the following weaknesses are most significant:

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

Facebook’s social networking website and related services are easily imitable in terms of basic features and functions. For example, other companies can develop their social networking websites to directly compete against Facebook Inc. Also, while the company earns through online advertising, this earnings mechanism is also a weakness because users could perceive the advertisements as a nuisance in their social media experience. Facebook also suffers from a low level of business diversification, which maximizes market risk exposure. This is so because 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 Facebook Inc. to grow its social media business internationally. This element of the SWOT Analysis enumerates the external strategic factors that the company can exploit to improve its business situation. The following opportunities are most relevant in Facebook’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 advertising business. The company has already taken steps in this direction, such as its purchase of Oculus VR, which is a virtual reality technology business that can support the social networking services of the firm. However, further diversification can boost Facebook’s business risk reduction. Another opportunity is for the organization to innovate more products that are complementary to its social networking website and mobile apps. Market penetration and development can increase membership and revenues, in line with Facebook’s generic and intensive growth strategies. This element of the SWOT analysis indicates the need for Facebook Inc. to reform some of its strategies to ensure continuous growth.

Threats Facing Facebook Inc. (External Strategic Factors)

Facebook Inc. experiences the potential risks and negative effects of threats in its business environment. External strategic factors that prevent or impede business growth are outlined in this element of the SWOT Analysis. Facebook must address the following threats against its social media and online advertising business:

  1. Imitation
  2. Cybercrime
  3. Market saturation

Imitation is one of the major threats in the business, considering that other firms could develop social networking websites and mobile apps similar to that of Facebook. Also, with increasing membership, Facebook Inc. now experiences high risks of cybercrime, which threatens to reduce the attractiveness of the company’s social media services. Moreover, as the organization becomes more popular, it increasingly contributes to market saturation that could lead to a future business growth plateau or stagnation. Based on this element of Facebook’s SWOT analysis, it is crucial for the company to develop new products and related technologies, and to enter new businesses.

Facebook’s SWOT Analysis – Recommendations

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

References
  • Facebook Inc. Form 10-K, 2015.
  • Bernroider, E. (2002). Factors in SWOT Analysis Applied to Micro, Small-to-Medium, and Large Software Enterprises: an Austrian Study. European management journal20(5), 562-573.
  • Jackson, S. E., Joshi, A., & Erhardt, N. L. (2003). Recent research on team and organizational diversity: SWOT analysis and implications. Journal of management29(6), 801-830.
  • Leigh, D., & Pershing, A. J. (2006). SWOT analysis. The Handbook of Human Performance Technology, 1089-1108.
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