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 :
7. https://workandroll.wordpress.com/2013/08/27/industry-and-porters-five-force-analysis-social-media/
posted by Unknown @ 10:17 AM
3 Comments
3 Comments:
very nicely defined and sorted. good job :)
Wow!! I'll use fb more from now on!!
interesting!
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