Facebook Marketing Opportunities - Essay Example

?INTRODUCTION The eminent rise of social media has attracted many organizations to set foot in the market. Facebook being the most successful and attractive social media website has decided to acquire Instagram. With this acquisition, Facebook would be provided with an opportunity to enhance its services offered to the customers. With Instagram embedded in Facebook, the customers would be provided with an ability to retouch their photos on their mobile phones. In addition, those retouched photos could be uploaded on social network platforms. The revenue stream of Instagram is not prominent enough yet but due to its 30 million users, the company was valued at $20 million in the year 2011. To acquire such an organization with diverse end users, Facebook offered Instagram with a billion dollar deal with an aim to purchase the popular photo sharing application (Luckerson, 2013; Geron, 2012). This acquisition move taken by Facebook is being regarded as defensive move against rivals such as Google and Pinterest; new entrant (Hill, 2012). Lawrence and William (1998) defined strategic management as an art and science of decisions and actions that could help the organization in the development of effective strategy or strategies. As a result, the organization provides itself with an ability to achieve its desired organizational goals along with corporate goals. In short, the process of strategic management could be defined as a process in which the top management determines the objectives that needs to be accomplished and based on such objectives; the top management makes strategic decisions. On the other hand, Porter (1985) indicated that formulation of strategies is directly related to an organization and its environment. This indicates that the process of strategic management focuses highly on systematic management of change through which organization mobilizes its resources to gain desired goals and objectives in forthcoming years. Acquisition is one of the most prominent concepts in strategic management which evidently is applicable to this case also (Thompson & Martin, 2010). In this particular case, it has been clearly mentioned that Facebook offered Instagram with a billion dollar deal with an aim to acquire the company. Through this acquisition, Facebook intends to enhance its competitive edge against rival organizations such as Google and Pinterest. In addition, this acquisition would enable Facebook to strengthen its market share. Moreover, this acquisition would provide Facebook with an opportunity to motivate the end users to upload and share pictures frequently (Hof, 2013). The objective of this assignment would be to evaluate the opportunities and threats that lie ahead of Facebook within the market. Moreover, the different methods of strategic development would also be defined and described to evaluate the reasons for organizations to opt external methods of growth rather than any other methods available. This would provide significant information regarding the method of growth applicable in this particular case of Facebook’s acquisition of Instagram. Lastly, TWOS matrix would be used in this assignment to evaluate and critically analyze the strategic decisions made by Instagram’s management to join forces with Facebook. FACEBOOK’S ACQUISITION OF INSTAGRAM Facebook has been known for its ability to provide the customers with an enlivening and enriching experience in terms of photos sharing with the loved ones and friends. To further enhance the experience, the company announced to acquire Instagram; a free application that provides the customers with an opportunity to retouch their photos before sharing them with the rest of the world. With such acquisition, Facebook was provided with significant opportunities in the market. On the other hand, the rise of eminent threats also enhanced significantly that the company cannot ignore at any cost (Blagdon, 2012). Strategic opportunities and threats facing Facebook The importance of iPod to Apple could be significantly compared with Instagram to Facebook. Instagram could be regarded as an artfully designed product that could help Facebook to great extent in the market. Some of the most prominent opportunities that Facebook would be provided with in forthcoming years are discussed below; Opportunities With the acquisition with Instagram, Facebook has been provided with an opportunity to reach mass audience in the market. Facebook has already been known for its quality experience in social networking but with Instagram working together with Facebook, the customers would be provided with an ability to share their retouched photos frequently. It has been indicated that most of the customers had lots of photos and pictures on their smart-phone but none of the pictures were shared with the rest of the world as these pictures were not considered worthy. With Instagram, the customers would have opportunity to make their pictures novel which will eventually help them in revealing their true identity as well as where they are (Hill, 2012). Being the logical owner of Instagram after the acquisition, Facebook would be able to enhance its services towards the customers. With this product, Facebook could significantly enhance its value proposition which will eventually result in higher number of people sharing their personal lives through photos. Instagram being the most popular mobile application would provide Facebook an ability to reach millions of customers at the same time. In addition, Instagram has already built extensive mobile photo sharing community where the people could give classic looks to their photos to share them at Facebook, Twitter or any other social networks (Hill, 2012). Furthermore, by working together to achieve common goals could help Facebook and Instagram to evolve with the passage of time. This will eventually help the organization to build and enhance its network in the 21st century. Instagram is regarded as an interesting product due to its ability to attract customers. By taking the position of Instagram into consideration, the organization can breach and push into its competitors space allowing Facebook to lure people’s attention. Lastly, Facebook has weak grip in the mobile environment due to which it lacks ability to attract mobile users to utilize the services offered by Facebook. But with Instagram that has strong holds in the mobile environment will eventually help Facebook to eliminate its vulnerability. With Instagram’s capabilities added with Facebook, this will help the organization to shine in the IPO on Wall Street. Moreover, Instagram would act as a defense mechanism against Google and Pinterest while at the same time, Facebook would be provided with an opportunity to enhance its involvement in the personal lives through smart phones (Blagdon, 2012). Threats Google is one of the major threats for Facebook. Google known for its innovation and creativity has high customer demand on internet. In addition, it has also been noted that new comers are also a threat for Facebook. One of such new comers; Pinterest, has been able to provide the customers with what they want. In addition, it has also been indicated that Pinterest’s offering in terms of organizing pictures have quickly gained customer’s attention which eventually has made this particular organization a star. Due to significant and eye-catching services provided by Pinterest, customers are being lured from the social network into the Pinterest’s space which will eventually lead to loss of market share. On the other hand, it has also been indicated that Instagram does not have any source of revenue. With this billion dollar deal, Facebook would be provided with opportunities but the threats would be greater in number. In addition, it has also been indicated that the acquisition between both the companies is still unclear in terms of years. In addition, it has become difficult to analyze that how long would the relation between both the organizations would last due to which the price paid for the acquisition was significantly higher than expectation (Blagdon, 2012). Methods of strategic development and growth of Facebook Strategic development, also known as strategic planning is the art and science of creating and running a business with an aim to expand the business in forthcoming years. With strategic development, an organization determines its strategic direction that where it wants to be in next 3-5 years. The strategic development of an organization leads to increased profitability, increase in market share and enhancement in customer’s satisfaction due to which, strategic development is essential for organizations to remain competitive in the market. In addition, with strategic development an organization can enhance its competitive edge in the market (David, 2013). The two most prominent models of strategic development that can help businesses determine the strategic direction are as follows (Wilson & Gilligan, 2012): Porter’s Generic Strategies The four generic strategies proposed by Porter can help an organization to gain competitive edge in the market. The strategies rely highly on the scope of business activities i.e. broad or narrow. In addition, it has also been indicated that such strategies are based on the extent to which the organization seeks to differentiate its products from that of others in the market. Ansoff’s Matrix The Ansoff matrix focuses highly on the growth of business in order to expand in terms of new or existing product in new or existing market. By providing a series of strategies, this model can help an organization to set the direction of its strategies accordingly (Lawrence and William, 1988). Hussey (2012) revealed that strategic developments are means to pursue strategic direction. To do so, organizations are provided with three development methods that are quite expensive and can radically change the nature of and culture of the business. Following are the three methods of external development to pursue growth: Acquisitions and Mergers Joint Ventures Strategic Alliances The method that is applicable in the case of Facebook’s acquisition of Instagram would be acquisition. Facebook acquired Instagram by paying it off with billion dollars in terms of cash and shares. With this acquisition, Facebook is provided with an opportunity to use the Instagram in the way it wants. This means that Facebook is the logical owner of Instagram that would significantly help Facebook to defend its market share from Google and Pinterest. In addition, Facebook with this acquisition would be able to breach Pinterest’s space and would be able to attract customers to utilize the free of cost services offered by the company through Instagram to retouch their photos before uploading them. Instagram’s Strategic Decision using the TOWS matrix To conduct a TOWS analysis, it is essential to critically evaluate and conduct SWOT analysis. The SWOT analysis of Instagram is as follows (Griffth, n.d.): Strengths 1. Instagram is an innovative organization that focuses highly on editing photos before being shared on social network. This makes the organization half photo editor and half social network. 2. Focusing highly on innovation, the company provides its customers with an opportunity to retouch their photos before being shared on variety of social networking websites such as Facebook, Twitter etc. 3. This particular application was crowned as the best application for the year 2011. 4. Being a free application, the organization is constantly able to attract customers in the market with higher focus on Smartphone users. 5. The company has no real source of revenue but still the application has $30 million users along with market value of $20 million. 6. Simplicity of the application is the core strength of Instagram as with this application users can apply filters in just second to alter photos due to which users are inclined towards Instagram than other programs. Weaknesses 1. It has been indicated that the organization does not have any real source of revenues due to which the organization might not be able to mitigate risks effectively in the long-run. 2. In addition, being solely a photo editor, the application lacks communication with others over the internet. Opportunities 1. With just being a photo editor that provides the users with an ability to retouch their photos, the organization has significant opportunities to grow through products and services expansion. This means that unlike other social networks, Instagram would have ability to help users communicate with one another while sharing high quality and worth images from time to time. 2. Due to the higher resolution and filters available at Instagram, the company has significant opportunities to replace cameras. 3. Most of the users are highly lifestyle conscious due to which they tend to use Smartphones. This would also provide the organization with significant opportunity because the growing demand of Smartphone will eventually help the Instagram to increase its number of users leading to higher value and worth in the market. 4. To merge or join forces with a highly reputed social network to enhance the products and services to eliminate competition. Threats 1. Pinterest is the foremost threat for the organization. Both the organizations are providing the customers with similar applications due to which Instagram might lose some of its users. 2. Similarly, the rising number of new entrants in the industry to provide the users with similar application would significantly reduce the worth of the organization. Based on the SWOT analysis of Instagram, TOWS analysis would be conducted which will eventually help to evaluate and analyze the strategic decision made by Instagram’s management to join forces with Facebook. The TOWS analysis is as follows; SO strategies 1. (S1,O1) By working together with Facebook, Instagram would be provided with an opportunity to expand its products and services under the leadership of high reputed organization. 2. (S6,O3) By joining forces with Facebook, Instagram would be provided with an advantage of attracting higher number of customers in the market. In addition, both the organizations would be provided with an opportunity to enhance its value proposition in the market. WO strategies 1. (W1,O4) With no real source of revenue, the survival of the organization in long-run was quite questionable. But by joining forces with Facebook; the number one social networking website, Instagram would be able to survive in long-run. 2. (W2, O3) Enhancing value proposition would be quite difficult for the organization with single application. In order to enhance its value proposition and worth in the market, Facebook would be the best available option than any other social networking sites as it has millions of active users in a single day. This would allow Instagram to attract new customers while enhancing its worth in the market. ST strategies 1. (S1,T2) New entrants in the market could significantly reduce the organization’s performance as they would be providing similar services as well. But being a highly innovative organization, Instagram have higher competitive edge than new entrants through which it can create high entry barriers to reduce new entrants entering the market. WT strategies 1. (W2,T2) Instagram being a sole photo editor application has directed all of its strategies towards the elimination of new entrants in the market. Being a highly innovative company with no real source of revenue, reducing new entrants would be the most feasible idea because providing the new entrants to enter the market would evidently lead to loss of market share and worth of the organization. CONCLUSION Facebook’s decision of acquiring Instagram was a significant move in the market as by missing such an opportunity, Facebook would have given its rival Google with a chance to enhance its reputation and offerings in the market. This would have eventually led to Facebook’s failure. With the acquisition of Instagram, Facebook has become the logical owner of Instagram through which the organization would be provided with significant opportunities. One of the most prominent opportunities would be the attraction of Smartphone users that are constantly lacking behind in photo sharing but with the embedding of Instagram, Facebook would be able to attract Smartphone users to share their photos more frequently. In addition, Facebook would be provided with 30 million additional users by becoming the owner of Instagram. This will eventually help Facebook to enhance its competitive edge against Google and Pinterest in the market. LIST OF REFERENCES Blagdon, J. (2012). Facebook’s billion dollar Instagram acquisition to actually cost $715 million. Available from http://www.theverge.com/2012/10/24/3551872/facebook-instagram-acquisition-715-million [Accessed 24 May 2013] David, F. R. (2013). Strategic Management: Concepts and Cases-14/E. London: Pearson Education Geron, T. 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