Case Study:
The end result of Facebook’s overall strategic planning will be a strategy—a broad plan that indicates what must be done to reach long-range objectives and carry out the organizational purpose of the company. This strategy will focus on many organizational areas, one of which will be competing with other companies that develop strategies in the same industry as Facebook. Once the strategy has been formulated using the results of an environmental analysis, Facebook management must conscientiously carry out the remaining steps of the strategic management process: strategy implementation and strategic control. As part of the strategy development process, Facebook management should spend time analyzing the environment in which the organization exists. Naturally, they should focus on Facebook’s general, operating, and internal environments. Environmental factors that probably would be important for Facebook’s managers to consider as they pursue strategic planning include the companies with which Facebook competes and the kinds of software those companies are developing or the ads they are selling; strengths and weaknesses of Facebook’s services when compared with those of competitors; the technologies that consumers are using for social networking; and the social and legal trends affecting the expectations for social media. Obtaining information about environmental issues such as these will increase the probability that any strategy developed for Facebook will be appropriate for the environment in which the company operates and that the company will be successful in the long term. Based on the previous information, after Facebook has performed its environmental analysis, it must determine the direction in which the organization should move regarding its competitors’ positions. Facebook has begun this process by developing a mission statement that describes the purpose for which the company exists. Facebook’s managers have several tools available to assist them in formulating strategy. If they are to be effective in this area, however, they must use the tools in conjunction with environmental analysis. One of the tools, critical question analysis, would require management to analyze the purpose of Facebook, the direction in which the company is going, the environment in which it exists, and how the goals might be better achieved. SWOT analysis, another strategy development tool, would require management to compile information regarding the internal strengths and weaknesses of Facebook, as well as the opportunities and threats that exist within the company’s environment. In recent years, for example, Facebook would likely have seen a strength in the widespread growth of active users and a weakness in its lack of capabilities to develop popular mobile apps. Management probably would classify up-and-coming mobile apps that lure away young users as threats and competition with television in mobile advertising as an opportunity. One approach to business portfolio analysis would suggest that Facebook management classify each major product line (SBU) within the company as a star, cash cow, question mark, or dog, depending on the growth rate of the market and the market share the Facebook product line possesses. Management could decide, for example, to consider the main Facebook website, the Facebook mobile apps, and Instagram as separate units for SBU analysis and categorize them according to the four classifications. As a result of this categorization process, managers could develop growth, stability, retrenchment, or divestiture strategies for each unit. Facebook management should use whichever strategy development tools it thinks would be most useful. Their objective, of course, is to develop an appropriate strategy for the evolution of Facebook’s product lines. To be successful at using the strategy they develop, management at Facebook must apply the set of skills needed for implementation: interacting skill, allocating skill, monitoring skill, and organizing skill. In addition, management must be able to improve the strategic management process when necessary. In addition to developing strategic plans for the organization, Facebook management should consider tactical, or shortrange, plans that would complement its strategic plans. Tactical plans for Facebook should focus on what can be done within approximately the next year to reach the organization’s three- to five-year objectives and to take business away from its competitors. For example, tactical plans could include how the company will sell video advertising and what price it will charge advertisers. Other tactical plans could include adding features to Facebook’s website and mobile apps to entice users to spend more time there. In addition, Facebook management must closely coordinate strategic and tactical planning within the company. Managers must keep in mind that strategic planning and tactical planning are different types of activities and may involve different people within the organization and result in plans with different degrees of detail. Yet they must also remember that these two types of planning are interrelated. Whereas lowerlevel managers would be mostly responsible for developing tactical plans, upper-level managers would mainly spend time on long-range planning and developing strategic plans that reflect company goals.
“Facebook Positions Itself to Stay Relevant” and its related Summary sections were written to help you better understand the management concepts. Answer the following discussion questions about the Challenge Case to better understand how strategic planning concepts can be applied in a company such as Facebook.
1. For Facebook’s management, is acquiring a business such as Instagram a strategic management issue? Explain.
2. Give three factors in Facebook’s internal environment that management should be assessing in determining the company’s organizational direction. Why are these factors important?
3. Using the business portfolio matrix, categorize Facebook’s recently acquired Instagram unit as a dog, question mark, star, or cash cow. From a strategic planning viewpoint, what do you recommend Facebook management do with Instagram, given this categorization? Why?
Your answer must be typed, double-spaced, Times New Roman font (size 12), one-inch margins on all sides, APA format and also include references.