International Business Essay Examples & Outline
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Facebook and the rest of the social media companies serve to prove the epitome advanced by the father of internet that internet does not just connect the machines but it also links the people. The boundless nature of the internet means that once a company goes online, basic rules governing the international business models will have to apply. The company has been able to attain meteoric rise. However, this is not the only issue that the companies such as Facebook face since there is always an eminent danger of the companies undergoing precipitous falls. In order for Facebook to survive the competition and retain the massive acceptance that is has received since its introduction in 2004, it has to be mindful of the business dynamics that apply in the international markets (Leeming & Danino, 2012). The best way of winning in the international market is by adapting ones operations to the changes that occur in the real-time. Better still, the company can forecast the needs of the market and come up with the solutions. The paper will look at Facebook in the international market.
There are various ways that Facebook interacts with the economy of various nations. Facebook impacts the economies of the nations by the traditional narrow effects which are the result of day to day activities within the nations (Bechmann, 2013). The second impact of Facebook is attained through the broader effects. The broader effects result from the actions and interactions of the third parties in the eco system created by Facebook. The narrow effects of Facebook result from the direct effect of spending by the company in the remuneration of the employees and the profits that result from its activities, value created by the company in the supply chain and the induced effect. Broader impact of the company result from the ability of the company to act as a platform for adverts by other companies. The value that the companies have as a result of the adverts is the main source of the broader effects of the company. Therefore, any change in the economy that affects the above sectors will definitely have an impact on the operations of the company. For instance the changes that erode the ability of companies that advertise with Facebook to do so will affect the financial position of the company. The other way of looking at it is through the price of the enabling infrastructure for the users such as broadband connections (Bechmann, 2013). If the people are unable to afford being connected to the internet due to high costs of connection or devices such as mobile phones will lead to fewer people using the platform. In the end the Facebook ends up losing the prospective financial gains.
Cultural effect on any international business can be interpreted in two ways. The first approach of understanding culture is by looking at the inherent culture which is the ordered way that the people live in a certain society. For instance, some regions may be oriented to a certain religion or a certain practice that they accord value to. The second perspective of culture is the trends in the society (Leeming & Danino, 2012). Trends are normally temporary. This means that there are trends that may arise in a certain area that may make people take up the products offered by the company. For instance, in the startup days of the Facebook, it was trendy to be a member of the social network and most of the people associated the fad with social approval.
However, as new direct and indirect competitors entered the market, the fad changed. In order to retain its relevance the company has been forced to make some changes on its outlook numerously such that it seems that it is keen on reinvention. The majority of the people were against the company in the startup times more so the ones that had formed opinions on what is acceptable in their cultural orientations. However, as the company has turned into a household name in the social media, the same people have softened the hard stances. The cultural changes that make the masses more inclined to accept the company are opportunities that the company has to capitalize on since they are new markets.
The increase in globalization has led to the development of new cultural strains that do not work according to the laid approaches to culture. This means that there are more people that are willing to go against the ordered ways of their enclaves to work with the new global throb. The development of the new “uncultured people” offer a different market that is ready to take more risks for the experiential purpose. In this case, Facebook has to come up with ways of addressing the needs of the above emerged group while respecting the wishes of the majority. Therefore, the need for customized focus can never be more real than before (Leeming & Danino, 2012). In summary, cultural diversity calls for sensitivity and inclusion of all the groups of people regardless of their cultural orientation. Customized products ought to be developed to respect the specific people. Provision of the services offered by Facebook in the many languages of the world passes the message to the people that the company is sensitive to the needs of the people (Leeming & Danino, 2012).
There are many issue that arise in the information age. One of the most recurrent one is the issue of privacy. Media reports of instances when Facebook users have expressed concerns about their privacy as a result of governmental institution using the information that they have put on their Facebook profiles for surveillance purposes. The right to privacy is one of the most integral rights enshrined in most of the constitutions in the world (Acquisti & Gross, 2006). Therefore, any concerns about the privacy of the information that the Facebook users post are of optimal importance. The above concerns can be used by the people and competitors to discredit the company and this will be the beginning of the end of the company. The other legislation area that has received enormous intention is in the area of cyberbullying whereby various people have died as a result of the aforementioned vice. Users of the social media site have raised concerns about the halfhearted approach that the company uses to deal with the issue (Viswanath, Mislove, Cha & Gummadi, 2009). Legislation in both cyberbullying and cyber surveillance arise from the concern on the safety of users of Facebook. In order for the business to retain its successful status, the company has to assure the users that they have the needed safety (Acquisti & Gross, 2006). The company has to follow all the rules that guarantee the safety of the users. It also has the power to push for the drafting and legislation of laws that are relevant in the market such that they will help solve the needs of the users and assuage the masses on their safety (Acquisti & Gross, 2006).
Facebook is a market leader but there are new entrants in the market that are real threats to the status quo. Market competition can be classified into two classes. On one hand there is the group of companies that have similar services with Facebook. The majority of the companies in this section of the competition are old and they have their own sections of the markets. This type of competition is not entirely demeaning since the users of the services offered by the competitors are strict followers. The users are frozen and they are not open to any form of change.
The second source of competition is a little hidden since the members of the competition may not be evident. This is the type of competition offered by social media companies that tend to offer differentiated services such as LinkedIn and twitter. In the case of twitter, the company defines itself as a microblogging site offering company that allows the people to offer their opinions on virtually any topic (Viswanath, Mislove, Cha & Gummadi, 2009). LinkedIn aim at connecting professionals. The companies may seem different from Facebook, however, the services that they provide have the potential of eroding the user base that is currently under the control of Facebook. Changes in the market have made the competition to be targeted at a certain user base such that the competition may pass unnoticed to the majority of the companies. Being in a comfort zone is a potential source of failure for the company. Therefore, the company has to adapt to the dynamic nature of the competition and offer the right response to the developments.
Politics and regulation
In the international market, the company has been subject to numerous forms of regulations whereby the majority of the rules have been implemented to protect the minority ages. In extreme cases, the content that the company displays has been regulated to all the people. In the case of china, there are strict laws that seek to limit the use of Facebook among the people for varied reasons (Kuczerawy, 2010). Some of the reasons often cited by the politicians and other legislators in their decisions to regulate the company is that the content that it displays is against the cultural orientations of the people. In this case, the politicians undertake the regulation to curb the use of the products offered by the company in their country, they also do this to ensure that the heritage of the people is sustained even in the wake of the internet age (Viswanath, Mislove, Cha & Gummadi, 2009).
These rules should be seen as irrational in some quarters but the people that make them deem that they have the legitimacy to do so.
Politicians have come to accept the social media as one of the major tools in their political careers. They use it to spread their agenda to the masses (Kuczerawy, 2010). This is a new market for the company but it is also a dangerous territory given the knack of the politicians to disproportionately make claims in the public. Any instance of impartiality of the politicians may be used by the opposing party as a way to discredit the company. Therefore, maintaining objectivity with all the political users is important.
The company also has the role of ensuring that the information that is received and printed on the papers is acceptable. The company should appear to be taking parts in the political debate since that should suicidal. It should take down any politically instigated posts as proof of its neutrality. This will ensures that the people see the company as an objective member of the society as opposed to a political entity poised on maintaining the wishes of a given part of the political divide.
The neutrality approach to the national politics ought to be applied in all the countries where the company has membership.
However, when it comes to the global politics such as the green economy debates, the company ought to be among the proponents of the change that will lead to the creation of better global relations and businesses. However, in some cases, the company may find itself being torn in between issues that touch on both the national and global politics. In this case, the best stand that the management can assume is to abstain from commenting on the issue directly (Kuczerawy, 2010). Instead, all the comments on such delicate political matters ought to be made in a focused and directed manner to avoid touching on the political players that are directly involved in the politics. Therefore, there is no single approach that the company can assume when dealing with the political issues affecting its users. This means that the political statements by the company ought to be directed and focused depending on the context. However, if it is possible, abstaining from the political comments will have a more desired impact than commenting. Maintenance of a neutral commenting and posting environment is also paramount (Kuczerawy, 2010).
Technological developments have made it possible for the services offered by the company to increase in terms of the scope. The machinery used in data hosting has also been increasingly cheap with the majority of the electronics producers offering a variation of such machinery. Software engineering has also witnessed significant changes such that the sites under development are designed with the needs and preferences of the people in mind. The above technological advancements have led to the creation of notions on what quality is to the ultimate consumers. For instance if the interface of the sites used for social networking is easily maneuverable, people may use this as a dimension for quality. Other may use the ability of the site to handle large bulky data as a quality dimension.
Therefore, the company has to come up with new approaches of ensuring that the quality dimensions that emanate from the technology in use at the company are up to the needs of the users. Investing in high data storing servers is also important. However, running the large servers has a cost connotation. Therefore, in as much as the company may be willing to provide the capacity as required by the users it has to consider the technology that has the least cost implications after conducting an extensive cost benefit analysis. Technology related decisions could be either be mediated by the competition and market needs or by the management (Viswanath, Mislove, Cha & Gummadi, 2009). The management can decide to develop the technology in an in-house facility or outsource its development to a specialized firm.
Dimensions of decision making process
There are five dimensions of decision making that the management has to consider. The first perspective of decision making affected by the above changes is the decision, perspective. This is dimension that seek to look into the nature of the decisions. The changes mentioned above will affect the actual definition of the decisions that has to be made by the management. The interpretation of the internal and external stimuli may differ from one manager to the other in the organization. However, the changes mentioned above will affect the perspective taken by the managers irrespective of the difference in the outlook. The definition and categorizations of a decision by the management in the initial stages defines the outcome of the decision in the end. Therefore, the changes will inform the definition of the decisions and their eventual implementation process. For instance the perception of the decision as a crisis will lead to the assumption of different action as opposed to when the decisions is taken to be an opportunity.
This dimension looks at the role of the decision makers. It lays emphasis on the strategic choices made by the managers and their endogenous behavioral component. The role of the upper echelons in the organization are also important in this perspective whereby the management determines the content of the strategic decision (Hill, 2003). The commitment of the top management in the decisions that will be informed by the changes will determine the effectiveness of the decisions in the field since the people have better reasons to carry out the decisions is the management has out rightly expressed their commitment to the decisions at hand. On the other hand in the event that the management does not show the commitment needed in the decisions making process, the chance of the company embracing the changes will be downplayed.
Environmental determinism perspective
The environmental dimensions to the strategic decisions making process seeks to explain the strategic decisions as an adaptation to the changes that are underway in the operational environment. Firms always adapt to the opportunities, threats or other changes that are characteristic in the environment (Hill, 2003). The managers are mere facilitators of the adaptation process. This approach to decision making is relevant in the case of Facebook since the changes mentioned above are results of the environment. Some of them are instigated by the action of the people while others are just results of the interaction of the player in the market. Therefore, this perspective or dimension of strategic decision making is the most relevant in this case study. The management ought to be the guiding map to the adaptations but it should play a minimalist role in informing the change. In the case of technology, the management can play the role of informing the decision by ensuring that the current technology is as current as possible to reduce the chance of obsoleteness. The decisions made by the management have to be in consideration of the role of the adaptation and the environmental dynamisms. The management at Facebook ought to be on the lookout for the dynamic nature of the market so as to come up with the most relevant decisions. It can do this by ensuring that the research on the market development is actively used by research and development department to come up with relevant solutions to the changes in the market (Hill, 2003).
This dimension of the decisions making looks at the characteristics of the firm and the influence that it has on the decision making process. This outlook of the strategic decision making looks at the internal factors. These are the elements of the firm that inform the decision making. This approach is linked to the inertial perceptive. Internal systems of the organization such as formal planning systems will have a significant influence on the decision making by the organizations (Hill, 2003). The hierarchy on the organization and the number of tiers used by the decision makers will always have a significant influence on the ease at which the decisions are made. Performance or the resource perspective will also have a significant effect on the decisions making with the majority of the decisions being made using the resource perspective as the main driver. The management at Facebook ought to consider the decisions on the aforementioned issue on the basis of the resources too.
The final aspect of the firm dimension of the decision making is the corporate control. The owners of the company ought to be informed of the major decisions that will be made from the aforementioned changes. The company will be able to attain the necessary levels of response to the changes if it has the ability to maintain a proper corporate control. The corporate control will make it possible for the management to determine the target market for the change and the price that the change will cost it both the hidden and explicit price (Leeming & Danino, 2012). The ability of the management to respond to the changes in the environment mentioned above will affect the competitiveness of the company given the competitive nature of the market. Innovation need particularly deeper attention since any firm that is ahead of the peers in terms of competitive innovations has a better chance of survival (Hill, 2003).
Facebook has been on track with the changes that are taking place in the marker. The management has adopted various approaches that have been instrumental in hedging the market that is currently under the company’s control. One of the approach that the company as adopted is ensuring that it is the leader in the particular section of the social media market. In order to retain the position that is currently holds, the company has been keen on increasing the number of users. It has also engaged in rebranding drives where it has changed the general outlook of the company.
It has also changed the icons used to link users to different functionalities. The rebranding has also assumed the focus of enabling the users to work their way around the site with comparative ease (Leeming & Danino, 2012). The company is mindful of the people aspect since without the people the business foundation will be thwarted eventually. Facebook respects the beliefs and values of the people. This means that it does not challenge the cultural orientation in as much as the views could be contrary from the mainstream ideals. It does that by ensuring that it brings down any pages that may be offensive to some cultures. Facebook has been more receptive to the safety concerns and cyberbullying laws. It works closely with the authorities to ensure that the cases of cyberbullying are on a decline (Leeming & Danino, 2012). It also advises the users on the various methods that they can apply to increase their security in the cyberspace.
The changes have strategic implications on the business. The ability of the company to adopt the changes and come up with the most accurate interventions will lead to the development of the acceptance of the choices made by the company. In the case of technology, it should ensure that it is current. Replacement of the technology ought to follow the tenets of replacement analysis. The adoption of the legislation may lead to loss of customers however, the potential savings that it could make in terms of avoided litigation liability will be important. In the case of the competition, the company ought to make changes that are focused on the benefits on the eventual gains to the final consumer. The users of Facebook are more than the ones for twitter.
However, the ability of the management to come up with the innovations that will match the growth rate of twitter will determine the survival of Facebook in the market. Linking up Facebook and twitter posts may cost the company the extra costs of handling the extra traffic but it will also make it possible for the users of Facebook to be involved in the twitter discussions. This is something that has been ongoing but it should have additional top management focus. The bargains on culture will not have particular financial implication but they will have a definite effect on the general outlook of the company (Leeming & Danino, 2012). Ensuring the company attain the necessary level of corporate responsibility is important since it will make it possible to maintain its position as the market leader.
Profit and loss statement
Fiscal year is January-December. All values USD millions. 2009 2010 2011 2012 2013 5-year trend
Sales/Revenue 777M 1.97B 3.71B 5.09B 7.87B
Cost of Goods Sold (COGS) incl. D&A 223M 493M 860M 1.36B 1.9B
COGS excluding D&A 145M 354M 537M 715M 892M
Depreciation & Amortization Expense 78M 139M 323M 649M 1.01B
Depreciation 76M 130M 303M 571M 866M
Amortization of Intangibles 2M 9M 20M 78M 145M
Gross Income 554M 1.48B 2.85B 3.73B 5.97B
2009 2010 2011 2012 2013 5-year trend
SG&A Expense 292M 449M 1.1B 3.19B 3.05B
Research & Development 87M 144M 388M 1.4B 1.42B
Other SG&A 205M 305M 707M 1.79B 1.63B
Other Operating Expense 0 0 0 0 0
Unusual Expense 0 0 0 0 117M
EBIT after Unusual Expense 0 0 0 0 (117M)
Non Operating Income/Expense 2M (2M) (19M) (7M) (13M)
Non-Operating Interest Income - - - 14M 19M
Equity in Affiliates (Pretax) 0 0 0 0 0
Interest Expense 10M 22M 42M 51M 56M
Gross Interest Expense 10M 22M 42M 51M 56M
Interest Capitalized 0 0 0 - -
Pretax Income 254M 1.01B 1.7B 494M 2.75B
Income Tax 25M 402M 695M 441M 1.25B
Income Tax - Current Domestic 97M 382M 724M 604M 1.22B
Income Tax - Current Foreign 1M 1M 8M 22M 68M
Income Tax - Deferred Domestic (73M) 19M (37M) (178M) (35M)
Income Tax - Deferred Foreign 0 0 0 (7M) (2M)
Income Tax Credits 0 0 0 0 0
Equity in Affiliates 0 0 0 0 0
Other After Tax Income (Expense) (107M) (234M) (332M) (21M) (9M)
Consolidated Net Income 122M 372M 668M 32M 1.49B
Minority Interest Expense 0 0 0 0 0
Net Income 122M 372M 668M 32M 1.49B
Extraordinaries & Discontinued Operations 0 0 0 0 0
Extra Items & Gain/Loss Sale Of Assets 0 0 0 0 0
Cumulative Effect - Accounting Chg 0 0 0 0 0
Discontinued Operations 0 0 0 0 0
Net Income After Extraordinaries 122M 372M 668M 32M 1.49B
Preferred Dividends 0 0 0 0 0
Net Income Available to Common 122M 372M 668M 32M 1.49B
EPS (Basic) 0.06 0.17 0.31 0.02 0.62
Basic Shares Outstanding 2.14B 2.14B 2.14B 2.01B 2.42B
EPS (Diluted) 0.06 0.17 0.31 0.01 0.59
Diluted Shares Outstanding 2.14B 2.14B 2.14B 2.17B 2.6B
EBITDA 340M 1.17B 2.08B 1.19B 3.93B
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