Question

You have been asked to assess the industry position of Facebook Social Media using Porter’s Five Forces and, based on your assessment, offer 3 ways, by which globalization can reduce Facebook’s single-handed influence on social media and using it to shape public opinion.

Answer 1

Competitive Rivalry or Competition with Facebook Inc. (Moderate Force)

Even with its leading social media market position, Facebook Inc. experiences the significant impact of competition.

There are only a small number of companies that offer online display advertising services similar to that of Facebook Inc. For example, YouTube LLC (a subsidiary of Google LLC) has a social media website that offers targeted online advertising service.

Bargaining Power of Facebook’s Customers/Buyers (Strong Force)

Customers impose pressure on Facebook Inc. in terms of what they want from the company.

Facebook provides social media services to its members/users. However, advertisers are the company’s primary source of revenues. These advertisers have the option to use substitutes, which are highly available. For example, instead of advertising on Facebook, customers could advertise on television, radio and print media, all of which are widely available and effective in reaching target audiences.

Bargaining Power of Facebook’s Suppliers (Weak Force)

Suppliers are among the factors that influence Facebook Inc.’s social network and display advertising services.

Examples of Facebook’s supply needs include servers and related computing and network technology/equipment, as well as office supplies. Some suppliers are large firms that exert a moderate force on the company. However, these supplies are available from many manufacturers.

Threat of Substitutes or Substitution (Strong Force)

Substitutes could potentially reduce Facebook’s business performance and create challenges in the social media firm’s industry environment.

It is easy for advertisers to pay for substitutes, such as television, radio and print advertising, instead of paying for Facebook’s social media advertising.

Threat of New Entrants or New Entry against Facebook Inc. (Weak Force)

The social media giant faces the negative effects of new entrants in the industry environment.

New entrants exert a strong force against Facebook, due to the low switching costs (low difficulty) of advertisers in moving from one service provider to another. However, this Five Forces analysis also shows that it is difficult to develop a popular and reliable social media brand similar to Facebook’s. It is also difficult to build the loyalty of advertisers and users/members.

Facebook's single handed influence on social media can be reduced due to globalization in the following three ways:

1. With trend coming from West, developing countries might start following and prefer Apps such as Instagram which are more trendy and keeps on adding new features from time to time.

2. A more socially interactive App might be developed by some developing country (TikTok App in India) and due to globalization it might become popular in other countries too.

3. Opposition by certain governments may lead to other countries also supporting it (due to globalization) and may lead to certain kind of restrictions on Facebook.