Prepare a 7-10-page business analysis that explains the generic business strategies for an organization, analyzes the business strategy used and the company\'s business model, analyzes the corporate strategy of the company and the overall corporate structure and management systems, and analyzes the strategic fit between the business and corporate strategies.
Introduction
AFI, VRIO, and value chain are just three concepts you need to understand as a business strategist. This assessment focuses on these important facets of business analysis.
Introduction
This portfolio work project will help you differentiate between business strategy and corporate strategy, and analyze the fit of a business strategy to an organization.
Scenario
Building on your work from Assessment 1, the vice president of strategy has now tasked you with providing a business analysis of the organization\'s business strategy. This includes level of diversification (product scope), geographical and vertical scope, and the overall fit with the business strategy or strategies.
Your Role
You are a strategic analyst for the company you have selected to use in this course.
Requirements
Use information from the company\'s website, the Capella library, and your course textbook to complete this assessment. Write a business analysis that includes the following:
• Explain the generic business strategies for the company. Include cost, differentiation, and focus or hybrid information.
• Analyze the business strategy the company uses in its marketplace approach. Provide examples of how the strategy is used to position the company in a competitive environment.
• Analyze the company’s business model:
o What are the core products?
o How does the organization make money?
o What is the customer value proposition?
o What is the profit proposition?
• Analyze the corporate strategy of the company. Include the product, geographical, and vertical scope in which it operates.
o Has the company expanded from its original product line or field of operation?
o Does the company own vertically related activities along the value chain for its products?
• Analyze the overall corporate structure and key management systems.
o Does the company employ diversification, vertical integration, or globalization?
o Are global alliances part of the corporate strategy?
• Analyze the strategic fit between the business and corporate strategies of the company.
Deliverable Format
The Business Strategy Analysis is a professional document and should therefore follow the corresponding MBA Academic and Professional Document Guidelines, including single-spaced paragraphs.
In addition to the analysis, include:
• Title page.
• References page.
• APA formatted references from at least five sources.
• 7–10 pages in length, in addition to the title and references pages.
• Written for executive leadership.
Evaluation
By successfully completing this assessment, you will demonstrate your proficiency in the following course competencies through corresponding scoring guide criteria:
• Competency 3: Analyze the internal and external environments of an organization in order to formulate and implement successful strategies.
o Explain the generic business strategies for a company.
o Analyze the business strategy a company uses in its marketplace approach.
• Competency 4: Apply strategic concepts and models to ensure the fit between strategy, organizational structure, capabilities, and goals; and the external environment.
o Analyze a company\'s business model.
o Analyze the corporate strategy of a company.
o Analyze the overall corporate structure and key management system of a company.
o Analyze the strategic fit between the business and corporate strategies of a company.
• Competency 5: Communicate business needs, opportunities, and strategies with multiple stakeholders.
o Address assessment purpose in a well-organized text, incorporating appropriate evidence and tone in grammatically sound sentences.
o Apply the standard writing conventions for the discipline, including structure, voice, person, and tone
Business Strategy
Executive Summary
Businesses across the world face ever-changing consumer environments and competitive markets that require them to put in place better strategies to remain operational. Business and corporate strategies are essential tools that businesses rely on to gain competitive advantages in their respective industries (Rothaermel, 2021). Competitive markets and dynamic consumer environments call for a plan to help managers guide their decisions as well as the effective use of resources to achieve key objectives. This kind of plan is known as a business strategy. The two main types of the business strategy include organizational (corporate) strategy and business (competitive) strategy (Porter, 1987). Facebook is the largest social media network and a favorite of social media marketers and brands globally. Facebook’s user base has continued to expand due to its growing popularity worldwide (Shukaev, 2019). The above-mentioned strategies will help Facebook better understand the market segment. This paper will analyze Facebook’s business strategy, business model, corporate strategy, analysis of Corporate Structure and Key Management Systems, as well as, the strategic Fit between Business Strategy and Corporate Strategy.
Generic Business Strategy
Facebook must rely on creating an appropriate business strategy, for it to continue maintaining a competitive advantage, and to allow it to grow further in the market. An effective business strategy will help the company to focus better on the company operations by enhancing a better understanding of the customers, their needs and desires, why customers prefer certain services, and what the company can do to satisfy customer needs (Ali & Anwar, 2021). A generic strategy is a general of positioning a firm within the industry. The three generic business-level strategies include cost leadership, differentiation strategy, and focus strategy.
Cost leadership Strategy
This strategy focuses on maintaining lower costs compared to competitors while providing the same value of products and services. It focuses on low costs in terms of the company’s operations, which entails low pricing and low input. Low pricing involves the creation of similar products with lower prices compared to competitors’ prices (365 Careers, 2018). Low input involves making sure there is inexpensive labor. To achieve cost leadership, the company must minimize the costs of input factors, including raw materials, capital, and labor.
Differentiation Strategy
This generic strategy allows businesses the opportunity to enhance their value through various ways such as functionality, product features, durability, and brand image. Differentiation strategy focuses on product or service uniqueness that enhances their value (VanDusen, 2019). Differentiation allows the company to increase the value of its products and services; however, high-quality services or products may affect premiums. An organization needs to use this strategy to expand its target customer base (Islami et al., 2020). The company should also understand whether the majority are willing to pay higher premiums.
Focus Strategy
A focused strategy emphasizes both differentiation and cost leadership strategy. However, the focus strategy reflects the company’s efforts to try to satisfy a niche market or a narrow competitive scope (Rothaermel, 2021). For instance, a focused cost leadership strategy will require Facebook to compete based on price by targeting a narrow market. In terms of focused differentiation, the company is required to provide unique features to meet the demands of a narrow market.
Facebooks Business Strategy
Facebook has indicated a rising trend in growth over the past 14 years. The company began with a handful of counts and currently has over 2.3 billion active users every month. Facebook is a true reflection of a modern tech company (Shukaev, 2019). The company has maintained its market dominance and remained relevant through rapid growth, acquisition of adjacent competitors, and aggressive monetization. Facebook has achieved its success through the establishment of a proper business strategy (Shukaev, 2019). The company is utilizing both a cost leadership strategy and a differentiation strategy to spearhead its success.
Cost-Leadership Strategy
Facebook has positioned itself as the most popular global social media that can maintain low-cost services for its users. Facebook uses the cost leadership strategy by keeping its subscription low and affordable (Johnston, 2022). This strategy has enabled Facebook to reduce its prices competitively. For instance, the Facebook account opening is free of charge. One does not need to pay a subscription every month to access basic communication, except in special situations (Johnston, 2022). Through Facebook, one can access a large number of consumers by using the free options to promote their brand and products.
The company has also built infrastructure that is cost-efficient and beneficial to consumers. For example, Facebook uses advanced computing technologies to maximize efficiency and avoid unnecessary costs. The company broadly offers its social media services to the global market (Shukaev, 2019). The online nature of the Facebook business allows it to reach internet users easily across the global market, hence meeting the broad competitive scope of the cost leadership generic strategy. The cost leadership strategy enhances the strategic objective of expanding the company’s online social network user base.
Differentiation Strategy
Differentiation is the primary strategy Facebook has adopted to help it grow its popularity, revenue, and customer base. This uniqueness attracts consumers across the ages all over the world (Shukaev, 2019). For instance, Facebook can make information more secure and private such that users’ profiles, pictures, and information can be limited to friends only. However, it provides the freedom to the account owner to adjust the security and privacy issues the way they want. In addition, Facebook tools and services are conveniently easy to use, including the option to share pictures and videos (Shukaev, 2019). Such uniqueness made Facebook to be the most popular social media platform across the world.
Many businesses or brands across the globe use Facebook to promote and engage their customers due to the technical features of the platform, which are most suited for customer engagement and marketing services. Many other social media platforms are offering similar services such as Twitter, YouTube, and LinkedIn; however, Facebook has differentiated itself from the others (Shukaev, 2019). Focused differentiation is widely used by Facebook. For instance, Facebook acquired Instagram and WhatsApp as a way of practicing focused differentiation. WhatsApp is a more secure platform that has enticed a customer base who are more concerned about privacy and security of communication (IvyPanda, 2021). On the other hand, Instagram is a mobile image-sharing app that has active users between 90 million to 1 billion users monthly.
Facebooks Business Model
Facebook is a social media company, hence primarily earning revenue through selling advertising space on the media platforms. The costs of advertising space vary based on an advertisement auction system (Shukaev, 2019). For example, marketers often define a budget for making an advertisement then Facebook decides on the number of impressions the marketer can receive based on their proposed budget. Other sources of revenue for Facebook include the sale of software, virtual reality software, and media subscriptions (Shukaev, 2019). Even though users access the platform free, some people may subscribe to further exclusive features for a fee.
Although Facebook’s monetization strategy varies across its products, it prioritizes fast growth over monetization. This happens because the sheer scope of the app’s user base will allow for some monetization strategy down the line (Johnston, 2022). For example, Messenger and WhatsApp show little to no revenue apart from some adverts experimentation and app purchases. However, with more than a billion users on each platform, Facebook is searching for monetization plans that fit the respective apps. In addition, Facebook understands the need for it to expand to adjacent social media areas (Johnston, 2022). Therefore, acquiring new companies has kept Facebook growing, competitive, and protected from the risk of being irrelevant. According to Johnston (2022), Facebook reported a total revenue of $117.929 billion in 2021. The total revenue reflects that Facebook earned approximately $323.09 million every day. Facebook and messenger’s annual income per user in 2021 was approximately $40.96. According to Shukaev (2019), Facebook’s high net margin is a reflection of the efficiency of converting sales to profit.
Facebooks Corporate Strategy
Facebook uses very ambitious corporate-level strategies. Facebook provides various applications to its users to enable them to meet their needs. Facebook.com is the main Facebook platform. It allows people to connect discover, communicate, and share on personal computers and mobile devices (Johnston, 2022). Facebook.com has had more than 2.23 billion users, globally monthly active users since 2018. Messenger is another product of Facebook, which is a messaging application. Others include WhatsApp and Instagram. WhatsApp is also a simple reliable and secure messaging application used by people across the globe (Johnston, 2022). In addition, Instagram is a photo-sharing platform, which is used by about 72% of the US population.
Facebook is used in many places across the world. Facebook was launched at Harvard University on February 4th, 2004. Mark Zuckerberg developed it alongside other co-founders (Shukaev, 2019). Currently, Facebook is accessible all over the world across the continents in Australia, America, Africa, Asia, and Europe (Shukaev, 2019). Facebook is accepted in most countries in these regions, which has enhanced its growth by expanding its customer base. Facebook began its acquisition in 2009 when it acquired the $47.5 million FriendFeed, which was a social networking company that allowed users to explore the web-based on friends’ activities rather than searching and browsing.
Facebook’s next vertical activity was the question of Instagram in 2012 which cost $1 billion. This image-sharing application has engaged a huge number of youths across the world (Shukaev, 2019). In an attempt to better court the mobile market, Facebook collaborated with HTC in 2013 to create the HTC First, popularly known as the Facebook phone. After gathering an immense level of capital through its social network, Facebook began focusing on these major acquisitions (IvyPanda, 2021). These corporate-level strategies are the most important to Facebook.
Analysis of Corporate Structure and Key Management Systems
Facebook’s corporate structure resembles that of many organizations having its highest-ranked executives making the most important decisions to achieve its organizational goals. Facebook’s CEO and chairperson is the founder Mark Zuckerberg (Shukaev, 2019). His primary role includes making decisions regarding the company’s direction and product strategy. In his leadership, over the past 15 years, Facebook has grown exponentially. Mark Zuckerberg has helped Facebook carry out valuable acquisitions. In addition, Sheryl Sandberg works at Facebook as the company’s chief operating officer (COO) (Shukaev, 2019). Sheryl Sandberg is a political and corporate veteran, who served both as a Google executive and as U.S. Treasury Chief of Staff. The presence of Sheryl Sandberg has had a significant impact on Facebook’s excellent user monetization.
Other leaders include Dave Wehner, chief financial officer (CFO). He previously served as CFO of Zynga. Mike Schroepfer is the chief technology officer (CTO). He previously served as VP of Engineering at Mozilla (Shukaev, 2019). Facebook’s chief procurement officer (CPO) is Chris Cox. He worked for 15 years in Facebook’s product suite. This team has also led to excellent employee satisfaction according to the Glassdoor ranking of 2018 (Shukaev, 2019). The leadership team entails a mix of skill sets, backgrounds, and unifying excellence in their respective fields, hence, a good fit for the company.
Facebook makes proper use of vertical integration to meet its organizational goals. More specifically, it utilizes a balanced integration, which is a vertical integration approach whereby a company merges with companies both before and after it along the supply chain. Facebook’s acquisition of Instagram and WhatsApp is a good example of Facebook’s effort to utilize a vertical integration strategy (dealroom.net., 2022). This company employs diversification to achieve consumers’ needs worldwide. Facebook’s acquisitions of Instagram and WhatsApp are a reflection of a diversification strategy against a saturation in subscriber numbers (IvyPanda, 2021). Therefore, Facebook has a good corporate strategy that has allowed its success over years.
Strategic Fit between Business Strategy and Corporate Strategy
Both the business strategy and the corporate strategy should align for the company to achieve its competitive advantage. A corporate strategy must support a business strategy for the business to be successful (Rothaermel, 2021). In the case of Facebook, it is honest to say that both the business strategy and the corporate strategy align since they are aiming to achieve a common outcome. The business strategy focuses on differentiation and cost leadership. Similarly, the corporate strategy focuses on diversification through the expansion of services and acquisitions of other companies (Instagram and WhatsApp) (Shukaev, 2019). The corporate strategy that utilized diversification by entering new markets through vertical integration aligns with the business strategy, which focuses on differentiation by using innovation to create new services specific to the consumer base in specific countries (Rothaermel, 2021). For instance, the Facebook messenger is more popular in the US while WhatsApp is more popular in other countries outside the U.S.
Conclusion
Facebook is the most popular social media company globally. Facebook has a good business strategy and corporate strategy that has kept it growing over the years. The generic strategy the company uses includes cost leadership and differentiation strategy. A generic strategy is a general of positioning a firm within the industry and entails the business levels such as cost leadership, differentiation strategy, and focus strategy. The company uses a cost leadership strategy in the sense that it offers free options and lower subscriptions for advertisements. Differentiation is the primary strategy Facebook has adopted. Many businesses or brands across the globe use Facebook to promote and engage their customers due to the technical features of the platform, which are most suited for customer engagement and marketing services. In terms of business models, Facebook earns revenue mainly from advertisements. The company’s corporate strategy focuses on diversification.
References
Ali, B. J., & Anwar, G. (2021). Porter’s Generic Competitive Strategies and its influence on the Competitive Advantage. Ali, BJ, & Anwar, G.(2021). Porter’s Generic Competitive Strategies and its influence on the Competitive Advantage. International Journal of Advanced Engineering, Management and Science, 7(6), 42-51. http://dx.doi.org/10.22161/ijaems.76.5
dealroom.net. (2022). Vertical Integration Explained: How it Works (+ Examples). https://dealroom.net/faq/vertical-integration
Islami, X., Latkovikj, M. T., Drakulevski, L., & Popovska, M. B. (2020). Does differentiation strategy model matter. Designation of organizational performance using differentiation strategy instruments-an empirical analysis. Vilnius Tech, 1(1). https://doi.org/10.3846/btp.2020.11648
IvyPanda. (2021). Facebook’s Business and Corporate-Level Strategies Research Paper. https://ivypanda.com/essays/facebooks-business-and-corporate-level-strategies/
Johnston, M. (2022). How Facebook (Meta) Makes Money. https://www.investopedia.com/ask/answers/120114/how-does-facebook-fb-make-money.asp#:~:text=How%20Does%20Facebook%20(Meta)%20Make,on%20an%20ad%20auction%20system.
Porter, M. E. (1987). From competitive advantage to corporate strategy. Harvard Business Review, 65(3), 43. http://eprints.stiperdharmawacana.ac.id/75/1/%5BMichael_E._Porter%5D_From_Competitive_Advantage_to_%28BookFi%29.pdf
Rothaermel, F. (2021). Strategic management (5th ed.). McGraw-Hill.
Shukaev, A. (2019). Facebook Inc. Strategic Analysis and Recommendation (An Undergraduate Honors Thesis Submitted in Partial fulfillment of University Honors Program Requirements University of Nebraska-Lincoln). https://digitalcommons.unl.edu/cgi/viewcontent.cgi?article=1154&context=honorstheses
VanDusen, P. (2019). How to differentiate your brand: Brand differentiation strategies for business success [Video] | Transcript. https://www.youtube.com/watch?v=iTTHzLCeRZU
365 Careers. (2018). Cost leadership: When a company sells cheap and makes money [Video] | Transcript. https://www.youtube.com/watch?v=qOEUQg7GWOs