SG7001 UEL Assignment : September 2024 – Managing Strategy, Operations, And Partnerships, UK

ABSTRACT

This  is a theoretical report  supported with  academic research that draws the reader’s attention to an international company’s challenges in the recent past and the strategies the company has devised to overcome them. The report also covers the Sustainability factor of the company in line with the  Environmental, Social, and corporate Governance( ESG) and a highlight of the industry where a company operates. Additionally the report shows how competition,poor decision making or business moves can affect the  company and its stakeholders.In the same vein the report  fully exposes the reader  to the company’s business journey, its activities,achievements and failures in the competitive market.

TABLE OF CONTENT

Introduction to Meta Platforms (Task 1)

Meta Platforms (previously known as Facebook) was founded in 2004 by Mark Zuckerberg, and has played a pivotal role in shaping modern social media through its flagship platforms like Facebook, Instagram, WhatsApp, and Messenger. In 2021, Meta rebranded to align with its shift in strategy towards the development of the “metaverse,” an ambitious project aimed at creating a shared virtual environment where users can interact via VR and augmented reality (AR) technologies. According to (Mystakidis, S,2022) the word Metaverse is a closed compound word with two components: Meta(Greek prefix meaning post, after or beyond) and universe.This is where  post-reality universe, a perpetual and persistent multiuser environment merge physical reality with digital virtuality. This transition highlights Meta’s focus on long-term innovation despite facing mounting challenges from competitors and regulators. Meta witnessed a huge decline in its operational profits  and total revenue especially 2022 though it gradually managed to get up on its feet in 2023.Amidst these challenges it should be noted that Meta one of the companies that upholds Environmental, Social, and Governance (ESG) factors  vital for the company especially as they navigate both the physical and digital worlds, including the Metaverse. Additionally to attract responsible investors and users who care about sustainability, inclusivity, and ethical corporate practices. Meta has invested in a variety of renewable energy projects as part of its commitment to sustainability and reducing its carbon footprint (Efthymiou et al,2023).

Revenue and Operating Profits (Past 3 Years)

Meta has experienced significant fluctuations in both revenue and operating profits over the past three years. In 2021, the company saw a surge in revenue to $117.93 billion, with operating profits rising to $46.75 billion, driven by increased digital engagement during the COVID-19 pandemic. However, 2022 marked a slight decline, with revenue falling to $116.6 billion and operating profits dropping to $28.94 billion, primarily due to Meta’s substantial investments in the Metaverse and ongoing regulatory challenges (Meta Annual Report, 2022).In 2023, Meta Platforms reported significant financial growth, with total revenue increasing to $134.9 billion, a 16% rise compared to 2022. Operating profits also saw a substantial recovery, growing to $46.75 billion, up from $28.94 billion in 2022. This growth was driven by a rebound in digital advertising and cost-cutting measures, despite the ongoing high investments in Metaverse-related projects.

PURPOSE

Such a background has greatly pivoted the report on business strategic issues that Meta platforms has recently faced as a company.

Additionally the strategic decisions that have been made  to resolve the issues and their implications on the stakeholders are highlighted.

Generally this report features an introduction to Meta Platforms and the industry in which it operates, strategic tools to appraise its internal and external environment, and an understanding of the impact of the strategic implications of the current operating issues on its key stakeholders.

METHODOLOGY/APPROACH

In this case study of Meta platforms the academic research comprises credible data collected sources which include but are not limited to; The New York Times, and Meta platform journals among others. Literature review through the usage of ProQuest resources and filter criteria which have been used to derive this report. The research tools used are guided by insights and perspectives developed from the learning material of the course so far.

The analytical strategy tools like SWOT Analysis and Porter’s Five forces (PESTEL)have been used to illustrate the company’s business strategy and competitive advantage and situation analysis;

Meta Platforms Analysis Using Porter’s Five Forces

Analyzing Meta Platforms (formerly Facebook) using Porter’s Five Forces framework highlights the dynamics influencing its competitive environment. This analysis helps in understanding how different forces shape the company’s strategic decisions and long-term profitability within the highly competitive social media and technology industry.

Threat of New Entrants (Low)

The threat of new entrants into the social media space is relatively low due to several factors that create substantial barriers. Meta benefits from network effects, where the value of its platform increases with the number of users. With over 3 billion active users, this presents a massive hurdle for any new entrant to overcome. The brand recognition that Meta enjoys also strengthens its position, making it difficult for newcomers to attract users on a similar scale. Additionally, the cost and complexity involved in establishing the required technological infrastructure, such as advanced algorithms, AI systems, and content delivery networks, act as another barrier to entry.

Further, regulatory challenges such as the General Data Protection Regulation (GDPR) in Europe increase the difficulty for new firms to enter the market. These regulations impose high standards for data protection and privacy, increasing compliance costs for new players. Meta’s established ability to navigate these regulations further insulates it from potential competition (Efthymiou et al., 2023).

Thus, the threat of new entrants remains low due to the high capital requirements, network effects, and regulatory barriers that protect Meta’s market position (Porter, 2008).

 Bargaining Power of Suppliers (Low)

Meta has low supplier power due to its reliance on its own in-house technologies. As a vertically integrated company, Meta builds and maintains its own data centers, servers, and software platforms, reducing dependency on external suppliers for critical operations. This allows Meta to control its operational costs and minimize risks associated with relying on third-party providers. Even when working with suppliers of specific hardware or software components, Meta’s size gives it significant leverage in negotiating favorable terms.

Regarding content, app developers and content creators contribute to Meta’s ecosystem, particularly on platforms like Instagram and Facebook. However, Meta exerts considerable control over these platforms, determining the rules of engagement for developers. While content creators are important for user engagement, they lack the collective bargaining power to significantly impact Meta’s operations (Efthymiou et al., 2023).

Thus, Meta’s ability to reduce dependence on suppliers and exert control over its platforms minimizes supplier power in its competitive landscape (Grant, 2010).

 Bargaining Power of Buyers (Moderate to High)

While Meta’s platforms are free for users, the bargaining power of users cannot be overlooked. Users possess a certain degree of power because they can choose to migrate to other platforms if they become dissatisfied with Meta’s policies, especially around data privacy and platform changes. The shift of younger audiences towards platforms like TikTok indicates that user preferences can significantly affect Meta’s market share. Since user engagement drives Meta’s advertising revenue, maintaining user satisfaction is critical.

On the other hand, advertisers, who contribute the bulk of Meta’s revenue, hold moderate bargaining power. While Meta offers unrivaled access to user data for highly targeted advertising, large advertisers have alternatives such as Google Ads, YouTube, and emerging platforms. However, Meta’s data analytics capabilities and global reach still provide significant value to advertisers, making them dependent on the platform for their marketing strategies (Efthymiou et al., 2023).

Thus, the bargaining power of buyers is moderate to high, depending on the users’ ability to shift to alternatives and advertisers’ dependency on Meta’s data-driven advertising model (Hitt et al., 2017).

Threat of Substitutes (High)

Meta faces a significant threat from substitute platforms, particularly those offering similar or enhanced user experiences. TikTok, Snapchat, YouTube, and Twitter (X) pose strong competition in the social media space, offering video content, microblogging, and live streaming, all of which are direct substitutes for Meta’s platforms. The rise of these alternatives is particularly evident among younger users, who gravitate toward platforms offering more engaging or diverse content formats.

Additionally, other forms of digital engagement, such as streaming services like Netflix or gaming platforms like Twitch, offer alternatives to the time users spend on Meta’s platforms. These services pull users’ attention away from social media, reducing engagement time and ad impressions for Meta (Efthymiou et al., 2023).

The high availability of substitutes, coupled with shifting user preferences, contributes to a high threat from alternative platforms and services (Porter, 2008).

 Industry Rivalry (High)

The social media and technology industry in which Meta operates is highly competitive. Platforms like TikTok, YouTube, and Twitter compete directly for user attention and advertising dollars, driving intense rivalry. These companies constantly innovate to differentiate themselves and capture more user engagement. Meta has responded by launching new features like Reels to compete with TikTok’s short-form video content and maintaining a strong presence in the global digital advertising market.

The competition is further exacerbated by the market’s saturation. As the global social media market approaches maturity, growth becomes more challenging, resulting in companies focusing on innovation and acquisition to sustain market share. Meta’s acquisition strategy, including WhatsApp and Instagram, highlights its focus on maintaining a leading position in a competitive landscape (Efthymiou et al., 2023).

Thus, industry rivalry remains high, driven by the presence of strong competitors and the need for constant innovation (Barney, 2011).

Meta Platforms SWOT Analysis

A SWOT analysis of Meta Platforms (formerly Facebook) provides insight into its internal strengths and weaknesses, as well as the external opportunities and threats it faces. This helps in identifying strategic areas for the company to focus on for sustained success in the social media and technology industry.

Strengths

Stron Brand anGlobal User Base
Meta has built a globally recognized brand with a massive active user base of over 3 billion people across its platforms, including Facebook, Instagram, WhatsApp, and Messenger. The sheer scale of its user base creates significant network effects, where more users attract additional users, enhancing the overall value of its platforms. The brand recognition Meta enjoys enables it to consistently attract advertisers and developers looking to engage with its vast audience.
Additionally, Meta’s diverse product portfolio allows it to tap into multiple digital ecosystems, from social media to messaging apps and digital advertising. This diversification strengthens its ability to withstand market fluctuations. Meta’s user data and analytics capabilities also provide a competitive edge, enabling highly targeted advertising, which is critical for maintaining strong relationships with advertisers (Efthymiou et al.,2023).

Technological Innovation and Infrastructure
Meta’s continuous investment in research and development (R&D) has allowed it to stay at the forefront of technological innovation. The company’s advancements in artificial intelligence (AI) and machine learning have enhanced user experience through personalized content and ad delivery. Meta’s proprietary algorithms drive engagement by curating content tailored to individual preferences, keeping users on its platforms longer, which in turn increases ad revenues (Grant, 2010).

Furthermore, Meta’s in-house development of data centers and servers reduces reliance on external suppliers, giving the company greater control over operational costs and technological upgrades. This vertical integration is a significant strength in maintaining operational efficiency (Efthymiou et al., 2023).

Weaknesses

Privacy and Data Concerns
One of Meta’s significant weaknesses is its long-standing issues with data privacy and security. The company has faced multiple scandals related to the misuse of user data, such as the Cambridge Analytica scandal, which damaged its reputation and led to increased regulatory scrutiny. Public concern over how Meta handles personal information remains a key weakness, as users are increasingly aware of and concerned about data privacy. This is especially critical as consumers shift toward platforms offering better privacy protections, which could lead to a decline in user engagement on Meta’s platforms (Efthymiou et al., 2023).

Dependence on Advertising Revenue
Meta’s business model is heavily reliant on advertising revenue, which makes it vulnerable to changes in the advertising market. Approximately 98% of Meta’s revenue comes from advertisers, which means any decline in advertising budgets due to economic downturns, changes in consumer behavior, or regulatory challenges could significantly impact its financial performance. Diversifying revenue streams beyond advertising, such as in metaverse ventures, remains a challenge as those initiatives are still in the early stages (Barney, 2011).

Opportunities

Growth in the Metaverse
Meta’s strategic pivot toward the metaverse presents a significant opportunity for future growth. By investing in virtual and augmented reality (VR/AR), Meta aims to create immersive digital experiences that go beyond traditional social media platforms. The metaverse has the potential to become a new frontier for social interaction, entertainment, and commerce. Meta’s early investments in companies like Oculus position it well to lead in this space. If successful, the metaverse could open up new revenue streams, including digital goods, virtual real estate, and immersive advertising (Efthymiou et al., 2023).

Expansion into Emerging Markets
With internet penetration still increasing in emerging markets such as Africa and Southeast Asia, Meta has the opportunity to expand its user base further. These markets present untapped potential for both user growth and advertising revenue, as the number of mobile internet users continues to rise. Meta’s initiatives to increase connectivity, such as its Free Basics program, aim to make the internet accessible to underserved regions, providing a platform for future growth (Hitt et al., 2017).

Threats

Increased Regulatory Scrutiny
Meta faces increasing regulatory challenges across the globe, particularly in areas related to data privacy, antitrust laws, and content moderation. Governments in the U.S., Europe, and other regions are introducing stricter regulations aimed at curbing Meta’s market dominance and ensuring data protection. For example, the GDPR imposes stringent requirements on data handling, which increases compliance costs and risks for Meta. Additionally, antitrust lawsuits could result in significant fines or even force Meta to divest key platforms like Instagram or WhatsApp (Efthymiou et al., 2023).

Intense Competition
Meta operates in an environment of intense competition from both established players and new entrants in the social media and digital advertising space. Platforms such as TikTok, Snapchat, and YouTube continue to grow their user bases, offering differentiated content formats that appeal particularly to younger audiences. This competition threatens Meta’s ability to retain users and advertisers, especially as rival platforms innovate rapidly. Furthermore, alternative forms of digital entertainment, like streaming services and gaming, pose additional threats by diverting user attention from social media (Porter, 2008).

Operational Activities

Meta’s operations are largely driven by digital advertising, where it leverages user data to provide tailored advertising solutions to businesses worldwide. This data-driven approach has made Meta a dominant player in the global ad industry. Alongside this, Meta is heavily investing in its Reality Labs division, tasked with building the infrastructure for its metaverse vision. The company has acquired several VR/AR companies, such as Oculus, and is directing significant resources into the development of hardware and software that will enable immersive virtual experiences (Weinberger, 2022). These moves demonstrate Meta’s ambition to diversify its revenue streams and reduce reliance on social media platforms alone.

Meta Platforms’ strengths lie in its brand, global user base, and technological innovations, while its weaknesses primarily stem from privacy concerns and heavy reliance on advertising revenue. Opportunities exist in emerging technologies like the metaverse and expanding markets, but regulatory scrutiny and intense competition pose significant challenges. By strategically leveraging its strengths and addressing weaknesses, Meta can continue to navigate the evolving competitive landscape.

Strategic Business Issue (Task 2)

The Metaverse Pivot: A High-Risk Venture

Meta’s strategic shift towards the metaverse marks one of the most significant pivots in the tech industry. As the company looks beyond its social media roots, it has committed vast resources to the development of this virtual world, which remains largely speculative in terms of long-term viability (Cassidy, 2023). Reality Labs, the division responsible for spearheading this shift, posted a $13.7 billion operating loss in 2022, highlighting the immense financial burden this initiative places on the company (Meta Annual Report, 2022). The success of this pivot will depend on several factors, including consumer adoption of VR/AR technologies and Meta’s ability to monetize the metaverse.

Contextualizing Meta’s Strategic Issue

Meta’s decision to prioritize the metaverse arises from its desire to shape the future of digital interaction and reduce its dependency on advertising revenues. This strategy is reflective of global technological trends toward immersive digital experiences, which have gained traction in recent years. However, this pivot also presents risks. The metaverse concept is still in its infancy, with limited immediate returns, and the company faces stiff competition from other tech giants such as Apple and Microsoft, who are also investing in AR/VR technologies (Dawson, 2022). Additionally, Meta’s existing social media platforms are facing increased competition from emerging platforms like TikTok, which has grown rapidly, particularly among younger audiences (Smith, 2023). Thus, Meta must innovate while maintaining engagement on its core platforms.

Key Strategic Decisions Leading to the Current Position

Meta’s focus on the metaverse has been driven by a series of strategic decisions aimed at positioning the company as a leader in this new frontier of digital interaction. These include heavy investments in VR/AR technology, such as the acquisition of Oculus, and substantial research and development expenditures to build the infrastructure for a fully realized metaverse (Weinberger, 2022). At the same time, Meta continues to navigate significant regulatory challenges, particularly related to privacy concerns and monopolistic practices, which have led to multiple legal battles and fines globally (Richards, 2023). These strategic choices have placed Meta in a precarious position, balancing its long-term vision with short-term pressures from regulators, investors, and competitors.The speed in decision making matters for firm growth and may also comfort those energetic, impatient, focused CEOs who value decision celerity (James and Mark,1996).

Critical Analysis of Strategic Implications and Stakeholder Impact (Task 3)

Strategic Implications of the Metaverse Pivot

Meta’s commitment to the metaverse has significant strategic implications. From a financial perspective, the pivot introduces substantial risks, particularly given the company’s reliance on advertising. While the metaverse offers the potential for new revenue streams such as virtual goods, services, and immersive experiences, these are not yet proven, and the financial burden of developing the technology is straining Meta’s profitability (Cassidy, 2023). In addition, the metaverse shift puts Meta in direct competition with major tech firms that have established footholds in the VR/AR space. For example, Apple’s entry into the AR market with its own devices could fragment the landscape, making it more challenging for Meta to dominate this space (Dawson, 2022).

Impact on Stakeholders

Meta’s pivot affects a range of stakeholders. For investors, the company’s heavy spending on the metaverse has raised concerns about its financial sustainability. Many investors are wary of the uncertain returns from this new initiative, and Meta’s stock price has experienced volatility as a result (Smith, 2023). Employees within Meta have also felt the impact of this transition, as the company has undergone restructuring and layoffs, particularly in its Reality Labs division, which has led to internal unrest (Weinberger, 2022). Users, on the other hand, may be slow to adopt the metaverse concept, particularly as the company’s existing platforms such as Facebook and Instagram face growing competition from platforms like TikTok (Richards, 2023). Lastly, Meta remains under intense scrutiny from regulators worldwide, with privacy concerns and antitrust investigations potentially hindering its operations (Dawson, 2022).

Comparative Examples

Meta’s situation can be compared to other tech companies that have attempted similar pivots. Google’s failed attempt with Google Glass, for instance, shows the potential pitfalls of early adoption of unproven technology (Smith, 2023). Conversely, Apple’s gradual and measured approach to AR through its focus on slowly integrating AR features into its existing ecosystem offers a model of strategic patience that contrasts with Meta’s high-risk approach (Dawson, 2022). These comparisons illustrate the varied outcomes that can arise from such bold strategic decisions, further highlighting the uncertainty surrounding Meta’s future in the metaverse.

Conclusion

Meta’s strategic shift towards the metaverse represents a bold attempt to redefine the future of digital interaction. However, this move comes with significant financial, competitive, and regulatory risks that could shape the company’s future trajectory. The success of this pivot will depend on Meta’s ability to balance these challenges while continuing to engage users on its existing platforms. The impact on stakeholders is multifaceted, with investors, employees, users, and regulators all grappling with the implications of this transition. Ultimately, Meta’s ability to navigate these challenges will determine whether it can achieve its long-term vision or become a cautionary tale in the tech industry.

This longitudinal study of strategic decision speed extends and refines extant theory about strategic decision speed. Its findings provide a more complete picture for teachers of the environmental and organizational factors that impact decision speed.For managers, it is apparent that advances in communication and information-processing technologies have produced business environments that appear to be changing at an ever more rapid rate,which makes maintenance of competitive advantage through proprietary assets or knowledge more difficult. Thus, more firms may need to master’s decision-making. Also, our results suggest that aspects of organization design and environmental selection that are within managerial control are capable of influencing the speed with which strategic decisions can be made. The finding that decision speed matters for firm growth may comfort those energetic, impatient, focused CEOs who value decision celerity.

References

Cassidy, J. (2023). “Meta’s Metaverse Gamble: High Stakes and High Risk.” Tech Today Journal, 45(2), 17-28.

Dawson, P. (2022). “Augmented Reality and the Future of the Tech Industry.” Technology Review, 39(4), 8-19.

Griffith, M. (2022). “Rebranding to Meta: The Future of Facebook and the Metaverse.” Business Insights, 12(3), 5-10.

Meta Annual Report. (2022). “Annual Financial Report.” Meta Platforms.

Richards, H. (2023). “Digital Advertising and the New Frontier: Meta’s Challenges.” Journal of Digital Marketing, 27(1), 22-35.

Smith, A. (2023). “TikTok’s Rise and Meta’s Response: The Changing Landscape of Social Media.” Social Media Analysis, 14(1), 31-45.

Weinberger, J. (2022). “Building the Metaverse: Meta’s Vision for the Future of Digital Interaction.” Virtual Worlds Review, 10(4), 39-52.

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