Competitive Analysis

Competitiveness can be defined as thecapability to offer something better in the market that is also being offered by other companies in the market. Even, if not better, it can still compete in price, value and quality of the product or service. Furthermore, Facebook has strong financial standing in the market, which includes having high technology, and initiatives at employinglatest technology such as artificial intelligence,which would increase the productivity of online advertisement and marketing.

Facebook has agood user base as compared to the other competitors like Twitter, Google Plus, and LinkedIn. Subsequently, Facebook has alarge collection of online user data that can be used for marketing purposes. Meanwhile, it has also built an online apps platform that can integrate with Facebook’s existing offerings and help Facebook attract new users, and marketers due to increased user interaction.

Consequently, Facebook has become capable of growing rapidly in the market, which isitstemporary competitive advantagethat can be converted to apermanent competitive advantage if Facebook successfully brings some innovations in its market offerings.Similarly, as far as innovation is concerned, it can be determined that clearly Facebook would be able to retain its creative innovation as asustained competitive advantage. Some of its innovative features are Facebook Live, discussion groups and also broadcasting live scores of football and Cricket matches. See Strategic Capabilities, and VRIO test in Appendices.

Financial Analysis

Facebook generates all its revenues from marketing and advertisement. Whereas, its revenues have dramatically increased from $53 million in 2012 to $10,217 million in 2016. On the other hand, its revenues have changed dramatically by theCompound annual growth rate of 273%. Similarly, its total assets have been increasing on average by 32% annually, however, the liabilities of the company have also been increasing by 15%, annually.

Furthermore, if in order to calculate the value of Facebook we assume that WACC is 10%, and growth rate is 8%, then the value of Facebook through the discounted cash flow model would be$377.36 billion. On the other side, the company has amarket cap of $380.62 billion along with the enterprise value of $349.08 billion.Further, see Table 1 for Projections.

 

 

References

Facebook. (2017). Annual report Facebook. California: Facebook.

MorningStar. (2017). FInancial Data. Unknown: MorningStar.

Yahoo. (2017). Yahoo Finance. Unknown: Yahoo.

 

 

 

Table 1 Projections (Source: Facebook Annual Report

Projections (Amount in $ millions)
Quarterly Semi-Annually (Medium Projections) Annually
Mar 31, Jun 30, Sep 30, Dec 31, June 30, Dec 31, Dec 31, Dec 31, Dec 31, Dec 31,
2017 2017 2017 2017 2017 2017 2017 2018 2019 2020
 $  6,436  $  7,598  $  8,970  $   10,589  $     8,809  $   12,057  $   12,236  $   16,996  $   23,608  $   32,793
 955  1,044  1,125  1,193  1,036  1,171  1,191  1,354  1,540  1,752
 1,636  1,783  1,875  1,904  1,759  2,115  1,897  2,302  2,793  3,389
 940  1,023  1,053  1,272  1,019  1,155  1,275  1,453  1,657  1,890
 389  438  466  548  437  464  548  582  619  658
 5,259  5,753  6,063  6,615  5,636  8,610  6,594  10,249  15,929  24,757
 2,895  3,957  4,498  6,579  4,043  5,954  6,602  9,545  13,800  19,952

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