Analysis Of External Environment : A Study On Facebook

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Question :

This step involves identifying opportunities and threats within the company’s external environment.

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Answer :


It is imperative for any organization to obtain an insightful introspection regarding the opportunities and the vulnerable threats in order to evaluate the current market stance along with the possibilities to avail expansion. Moreover, an ardent awareness regarding the external environment is also a prime requisite for any organization in order to seek the trajectory towards the relative competitive edge. In this regard, the current study suite is supposed to evaluate the aforementioned aspects on the current circumstances of Facebook in order to fathom their external industrial environment.  

Opportunities & Threat

The Opportunities of Facebook can be categorized as;

  • A significant increase of users regarding the advent of mobiles and identical technological expertise
  • Diverse sources of Annual revenue
  • Expansion to China (pp 18)
  • Open market place for Facebook

As per the current records, almost 600 million mobile users have access over Facebook. The opportunity is to explore this massive customer base simply by employing the portal of Facebook to display advertisements that might contribute to their annual revenue considerably (Brooks, 2014). Furthermore, due to relative regulatory ease that China has incorporated recently, Facebook holds an evident chance to flourish in this liberal market while pursuing their foreign market interests.

The Threats of Facebook can be categorized as;

  • Significant increase in Mobile internet consumption
  • The use of ad-block extensions
  • Sloth growth rate of Online advertising
  • Identity thefts (pp 3)
  • Weak business model

It is an established fact that the mobile advertising units only account 14% of their entire financial outcome from Facebook. It can be posed as a considerable and in this regard, the advertising business units need to be adept of charging the potential users otherwise the financial infrastructure might collapse (Al-Shawabkeh,  2014). Apart from the alarming aspect of slow growth, as the notion of identity theft has almost become rife, it is becoming gradually difficult for Facebook to thrive. In this regard, the unit can be recommended to develop a string and attractive business model that can attract more user.



As per the organizational analysis of facebook done with the analysis tool porter’s Five Forces it has been found that in the initial years at the advent of this social media page Facebook did not have any such competitions. However with the advancement of social media there are several social media platforms that have entered the market and have the ability to acquire the potential market of facebook (Brooks, 2014). Snapchat, twitter and instagram are such social media platforms that can proved to competition to the current status of facebook. In order to sustain their position in the market Facebook has constantly innovated the communication platform and it is important for all the players to innovate constantly in order to confirm their survival. Facebook in order to avoid the growing competition with instagram has tactically incorporated their services under the potential services of Facebook and it has proved to be a significant step for further development of the company (pp 4).

Bargaining Powers

Bargaining power can be classified in two sections and that are the bargaining power of the suppliers and the bargaining power of the customers.

Bargaining power of the suppliers

 As far as Facebook is concerned the bargaining power of the suppliers are moderate. The suppliers of facebook are the firms which supply this organization with technology and developers which facilitate the software development of Facebook (Singla, 2015). It is important to note that there are very few reputed suppliers of these technologies that facebook uses (Al-Shawabkeh, 2014). As the choice of the supplier is limited and switching is costly, therefore, bargaing power of the suppliers is of moderate level (pp 14).

Bargaining power of the customers

The customers of facebook are the various users of facebook and the apps which are associated with facebook. Since it is a proven fact that there is intense competition and the buyers are left with many choices there is no cost switching as well. It is important for facebook to plan an effective strategy in order to retain the customer loyalty as the bargaing power of the customers is high.

Threat of Substitutes

As per the studies of the experts setting up a social media platform like facebook is not an expensive task and therefore there is a major threat associated with the new entrants in the market (Singla, 2015). But the new entrants can face significant challenges regarding the amount of resources that are required for the brand recognition, marketing and creating a new customer base (pp 13). It is proven fact that for the substitute organizations of Facebook can take a long time to establish a new customer base which is essentially loyal. Therefore the threats of the new entrants are potentially low as far as Facebook is concerned.


In the light of the above study, it can be concluded that, though Facebook appear to be in a position that consolidates their stance. However, they need to strengthen their business model that might endow them with requisite relative competitive edge.