Disruptive organizations. A PESTLE analysis of the socioeconomic, legal framework, and business model of Facebook. Made for Master degree Business and O/I psychology students. By Sharilynn Hanslo

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This is a case study that examines one of the world’s most disruptive organizations to come out of the 21st century. Disruptive organizations destabilize leading markets by adding new value to a particular market, eventually replacing leaders, products and weakening corporate alliances. With billions of users, the power and social influence of Facebook cannot be disregarded. In encapsulating the philosophy of zeitgeist, Facebook represents power, dominance, and control in the 21st century. The purpose of the Ebook is to provide Master business students and O/I scientists with an analysis of the socioeconomic, legal framework, and business model of Facebook

Executive summary

Facebook has been a dominant force in the social, technological sphere since its establishment in 2004, making it one of the world’s most disruptive businesses. Additionally, social media has become vital for the development and growth of a business and an essential medium for online marketing and communication. Social technology is regarded as one of the disruptive technological advances of the 21st century due to shaping society both socially and economically. Disruptive organizations destabilize leading markets by adding new value to a particular market, eventually replacing leaders, products and weakening corporate alliances.

Due to the significant revenue Facebook generates through advertisements, the tech giant has disrupted popular advertising forms such as commercial and print ads. Although Facebook provides a free platform, it charges companies to use its online services and market its products. Facebook’s business model is multifaceted and built upon active user engagement; however, most of Facebook’s power can be attributed to its primary revenue source, advertising. By analysing Facebook’s business model, we seek to understand how the company maintains profitability and adjusts to social-economic changes.

 Economic factors can have a profound impact on business development and sustainability. Moving towards the report’s central thesis, we shall present a literature review based on the information presented by experts in the field. The objective is to provide insights and research on knowledge-based economic factors and explore different perspectives. By utilizing the research, we can gain insights and present unbiased data. In addition to using advertising to generate revenue, Facebook has a multi-layered business model.

 We will attempt to analyse the company’s business model in more detail using various analytical tools, such as the PESTLE Analysis and Porter’s Five Forces Framework. The Porter Five Forces Framework model analyses and assesses a business’s operating environment and identifies various operational processes, such as competition and bargaining power of suppliers. At the same time, PESTLE analysis attempts to identify the social-economic factors that may influence business development.

Additionally, we will discuss the main drivers of change affecting Facebook, which are often a combination of demographic, socioeconomic, and technological factors. Moreover, we will examine how Facebook complies with government regulations by exploring the political and legal frameworks under which the company operates. In conclusion, we will summarize all the key points in the report and suggest how Facebook may achieve business growth and profitability without compromising ethical business practices or bridging consumer data protection legislation.

Introduction

Founded in 2004 by Mark Zuckerberg, Facebook is the world’s largest online social networking platform, boasting roughly 2.89 billion active monthly users. Facebook is a social technology company with its headquarters strategically located in northern California, in the infamous Silicon Valley area. Silicon Valley is home to some of the world’s largest technologically innovative corporations. Facebook has been around for over a decade and has faced numerous privacy concerns regarding its revenue model, which involves selling personal information about its users to advertising companies, some of which will be discussed in this report.

The tech giant has revolutionized communication, influenced modern-day business development, and is viewed as a leader in disruptive innovation. Disruptive businesses provide innovative ideas and solutions to outdated processes. They destabilize old markets, rebuild them, and open a market that provides new value and growth. Once disruptive organizations become mainstream, they systematically reshape society socially and technologically. Through a series of mergers and acquisitions, the social media powerhouse continues to grow.

Over the years, Facebook has acquired several techs app and software companies since its first acquisition in 2005. To date, it has spent $23 billion on these companies. Some of which have remained secretive and not known to the public in the past. Nonetheless, some of Facebook’s parent companies are more known due to mainstream popularity, such as Instagram, a video-sharing social networking platform founded in 2010. And WhatsApp, an instant messaging app founded in 2009. 

By acquiring these companies, Facebook has increased profits while also monopolizing the social, technological sphere. As the third quarter, 2021, Facebook’s net income had reached nearly 9.2 billion U.S. dollars, while in the fourth quarter of 2020, Facebook’s net income had grown by 43 percent compared to the previous quarter, reaching a record high amount of 11.2 billion U.S. dollars for the comparative period. Statista. (n.d.).

As of 2021, Facebook rebranded as Meta Inc, a parent company of the social media platform, with Mark Zuckerberg appointed CEO. CEO Mark Zuckerberg and COO Sheryl Sandberg are among the company’s top key executives, with David Wehner appointed CFO. Meta was founded and began operations in February 2004 in Cambridge, Massachusetts, United States. Even though Facebook’s name has changed, the platform remains the same. 

However, the company plans to expand its brand by offering other products, services, and platforms such as Metaverse. A metaverse is a network of virtual worlds primarily focused on social interaction. This project can be described as a hypothetical implementation of internet enhanced virtual and augmented reality applications.

Mark Zuckerberg’s vision for Metaverse is connecting businesses, offering meta-services, and incorporating economic sustainability into future business development. Meta services integrate technology and apps under one brand to connect businesses and people. Moreover, Facebook expects to be 100% powered by renewable energy by 2020, which would produce net-zero emissions. The goal of the rebranding is to solidify Facebook as a social media company, which connects people and businesses under one brand. The missions of the corporation are listed on their website as. 

Mission: “The metaverse is the next evolution of social connection. Our company’s vision is to help bring the metaverse to life, so we are changing our name to reflect our commitment to this future”.  

Vision statement: “It will let you share immersive experiences with other people even when you cannot be together — and do things together you could not do in the physical world. It is the next evolution in a long line of social technologies, and it is ushering in a new chapter for our company.” 

Suitability Goals: “At Facebook, we believe sustainability is about more than operating responsibly. It is an opportunity to support the communities we are a part of and make a bigger impact on the world”. Meta (2021). 

History of Facebook

Mark Zuckerberg founded Facebook while still a sophomore computer science student at Harvard University along with his classmates, Eduardo Saverin, Andrew McCollum, Dustin Moskovitz, and Chris Hughes. Before Facebook, Zuckerberg created a website called face smash that invited users to rate each other’s photos. Zuckerberg hacked into Harvard’s security system, enabling him to access the personal information of many student profiles.

However, Zuckerberg decided to shut the site down since the website violates people’s privacy. “Issues about violating people’s privacy do not seem to be surmountable. The irony of his statement is that Zuckerberg later went on to create Facebook, the world’s largest online platform, which provided the company with billions of personal data. An interesting fact about Mark Zuckerberg is that he had originally decided to go to Harvard to study psychology, not computer science.

In addition to psychology, Zuckerberg also took computer science classes. The choice to study psychology may seem contrast in comparison to the passion he had for coding and computer science as a child; however, once you begin to analyse Facebook’s success, you soon understand that much of it is due to Zuckerberg’s understanding of human behaviour and the addictive nature of the mind since much of Facebook success is attributed to the platform’s addictive nature.

Facebook expanded to the rest of the Boston area, attracting students from different Ivy League universities. By the end of 2005, it had 1 million users and received a $500k investment from Peter Thiel, its first major investment. Thiel was aco-founder of PayPal, the digital payment service, and the first outside investor in Facebook. Thiel later went on to co-found Palantir, a government-supplied data-intelligence company. Shortly after, Zuckerberg dropped out of Harvard to run Facebook from its new headquarters in California.

The company spread across the world in subsequent years, becoming one of the most influential, disruptive, and high-value companies of the 21st century. Currently, Facebook has over2.89 a billion active monthly users and 58,604 full-time employees, which covers all 82 Facebook offices worldwide. The social network was responsible for the emergence of user-generated content, also known as Web 2.0. As of today, it has an estimated 2.89 billion active users and continues to be controversial due to data privacy issues and resulting in a generation of people addicted to social media. Several opinions

 have been expressed about Facebook. When the movie “The Social Network” was released, it had been criticized for omitting or distorting crucial information. While some criticism is to be expected, the company’s rapid rise to success is undeniable. With billions of users, the power and social influence of Facebook cannot be disregarded. In encapsulating the philosophy of zeitgeist, Facebook represents power, dominance, and control in the 21st century.

To learn more about Disruptive organizations, Facebook Canvas business models, PESTLE analysis, and drivers of change and legal frame work click on the link below.

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