Core Competency of Facebook

Core competency refers to a specific set of skills and expertise that a company may have over its competitors. One of the most essential aspects of a core competency is that they help gain access to a range of markets and consumers. On a personal perspective, I think facebook really understands how and why people connect. Using this knowledge they were able to build a platform where people kept pulling in friends and family keeping the social network growing and we witness that every day. More and more people are joining facebook, including your co-worker, parents also distant relatives whom you’d like to avoid seeing you pictures! This is where privacy comes in, along with all the reasons we use facebook on a regular basis. Every time we search online for the best restaurant deal, share good news or bad with our Facebook friends, or tweet to our followers, our "audience" is bigger than we  know.

In an article in the Forbes Magazine, the Trefis Team concluded that “Facebook  almost doubled its stock price from the IPO level of $38 per share. The market values the company at more than $200 billion, with a P/E ratio of around 70. Its top-line has risen by over 60% during the last nine months, and this impressive growth is expected to continue in the future.” One of facebook’s accomplishments include beating Google as the most visited site in USA in 2010 from where experts started predicting that greater things lay ahead of Facebook.

In addition to its core platform, Facebook also has other platforms including Messenger, Instagram, WhatsApp and Search, each of which have the potential to become multi-billion dollar businesses. In many respects, the company has not even begun scratching the surface of this opportunity. With new features adding, facebook has kept updated to our needs even sometimes when we don’t realize it. Every time facebook updates something new, it might take a while to get used to it but once we do, it’s the best thing ever! Some reasons why we absolutely love “timeline”.  Although the acquisition of WhatsApp for 19 Billion USD is of some debate, for me it’s an addition to the facebook family which has higher potential of growing together.

Also on the other hand, Social networks and other communication platforms have a fickle history – once prominent platforms like MySpace, Friendster, Hotmail, MSN Messenger and Hi5 have over time lost most of their active users. The social networking market is highly competitive and is prone to rapid. Facebook needs to continuously innovative and adapt to changing user trends to keep the engagement levels stable on the platform. The low  barriers  to entry in the Internet business further intensifies the competition in this market. Moreover, Internet usage is increasingly shifting to mobile devices, where the landscape is quickly evolving.

References:

1. http://digitaladblog.com/2013/12/01/facebook-can-they-sustain-their-competitive-advantage/
2. http://www.trefis.com/stock/fb/model/trefis?freeAccessToken=PROVIDER_7dbbbc265ca45c88d93ed5dea0b87ecaa1c538f5
3. http://en.wikipedia.org/wiki/Facebook
4. https://workandroll.wordpress.com/2013/08/27/industry-and-porters-five-force-analysis-social-media

Porters Five Forces on Facebook

Porters Five Force Model of Facebook :

Facebook is nothing more than a medium for communication, and yet, it is so much more than that. It is a name that needs no introduction, since its birth in February 2004 Facebook has grown from a university project to a multibillion dollar company in a decade and is still growing. At a glance, a user can learn everything from what gender a Facebook member is, to what religion they believe in, what school they attend, and their likes and dislikes, all with the click of a mouse.

The porter’s five-force model is a famous and powerful business framework to analyze where power resides in a business model. The main purpose of the Porter’s five-force model is to find a position in an industry where a company or business model can defend itself against competitive forces or can influence them in its favor.

Porter Five Force Analysis

Competitive Rivalry Within The Industry:

·    Facebook commands a loyal user base across several user demographics and geographies. However, competition from Google+ and Twitter can cause a reduction in the average time spent by active users on Facebook, as these platforms offer unique sets of features.  For example, Snapchat is a new app that appeals to a younger audience and is more popular among females, hence Facebook could see competition intensifying within different user demographics.

·         Also statistics show that desktop usage is being replaced with mobile usage, rapid changes on the mobile industry pose a potential threat to Facebook. (Facebook’s  ad revenue contribution of its mobile platform increase from about 14% in Q3 2012 to 53% in Q4 2013).

·    There are several regional social networks, such as Renren in China, Mixi in Japan, vKontakte in Russia, etc., and these compete with FB for users in their respective geographies. Increased regulation in certain markets such as China is more beneficial to regional players.

Bargaining Power Of Customers:  

•            Users on platforms including Facebook, Whatsapp, Instagram, Messenger, and marketers advertising on these platforms, represent customers for Facebook.  The large-scale competition, the bargaining power of users is high.

Threat Of New Entrants:

•          The Internet business is characterized by low barriers to entry. It is relatively easy to build new sites and applications. However, significant amount of resources are required for marketing and for gaining brand recognition, and this raises the barriers to entry to an extent.

Threat Of Substitute Products

•        At the end of October 2013, Google's homegrown social network Google+ had close to 540 million active users . In terms of scale, Google+ remains the biggest threat to Facebook in the social networking space. Competition from Google+ is likely to increase further given Google's aggressive promotion as well as seamless integration it can achieve with Google's other services like YouTube, Google Maps and many more.
•           Others include Twitter, LinkedIn for professionals and also Snapchat which Facebook offered 4 Billion USD in 2013.

Bargaining Power Of Suppliers:

•                Providers of servers, storage, power, software, data center and office equipment, technology etc. represent suppliers for Facebook. It is expected that their bargaining power to be moderate, as Facebook is a large scale customer holding significant buying power.

·         However, there are only a few reputed suppliers for a large range of hardware and software supplies, and hence this raises their bargaining power to an extent.

Some interesting facts on Facbook.

References :

1.      http://www.forbes.com/sites/lydiadishman/2011/08/08/saks-slides-into-competitive-position-with-its-new-dedicated-flash-sale-site/

2.      http://edition.cnn.com/2010/TECH/social.media/12/30/facebook.beats.google.cashmore/

3.      http://ayeshamascarenhas.tumblr.com/post/30917292852/core-competencies

4.      http://en.wikipedia.org/wiki/Facebook

5.      http://www.trefis.com/stock/fb/model/trefis?freeAccessToken=PROVIDER_7dbbbc265ca45c88d93ed5dea0b87ecaa1c538f5

6.      http://www.forbes.com/sites/greatspeculations/2014/11/28/facebook-through-the-lens-of-porters-five-forces/

7.      https://workandroll.wordpress.com/2013/08/27/industry-and-porters-five-force-analysis-social-media/