Harvard Case - Facebook: Facing Off Against Tencent
"Facebook: Facing Off Against Tencent" Harvard business case study is written by Ali Farhoomand, Paul Lowry, Filip Ziolek. It deals with the challenges in the field of General Management. The case study is 24 page(s) long and it was first published on : Jun 20, 2017
At Fern Fort University, we recommend that Facebook implement a multi-pronged strategy to effectively compete with Tencent in the emerging markets, particularly in Asia. This strategy should focus on: adapting its business model to local markets, prioritizing mobile-first experiences, investing in localized content and services, strengthening its social commerce capabilities, and embracing a more localized approach to corporate social responsibility.
2. Background
The case study 'Facebook: Facing Off Against Tencent' highlights the growing competitive landscape in the social media and internet services sector, specifically in emerging markets like China. Facebook, despite its global dominance, faces a formidable challenge from Tencent, a Chinese tech giant with a diverse portfolio of successful products and services that cater to local preferences and needs. Tencent's success in China, particularly with WeChat, demonstrates the importance of understanding and adapting to the unique cultural and technological landscape of emerging markets.
The main protagonists of the case study are Mark Zuckerberg, CEO of Facebook, and Ma Huateng, CEO of Tencent. Both leaders face the challenge of navigating the complexities of international business, particularly in the context of rapidly evolving technological landscapes and diverse cultural contexts.
3. Analysis of the Case Study
To analyze the situation, we can utilize Porter's Five Forces framework, which identifies the competitive forces that shape an industry's attractiveness and profitability:
- Threat of New Entrants: The social media landscape is highly competitive, with numerous new players emerging, particularly in emerging markets. However, Facebook's established brand and global reach create a barrier to entry for new entrants.
- Bargaining Power of Buyers: Users have a high degree of bargaining power, as they can easily switch between platforms. Facebook needs to continuously innovate and provide compelling user experiences to retain its user base.
- Bargaining Power of Suppliers: The bargaining power of suppliers, such as app developers and content creators, is moderate. Facebook needs to maintain strong relationships with these suppliers to ensure a vibrant ecosystem.
- Threat of Substitute Products: The threat of substitute products is high, as users can choose from a wide range of social media platforms, messaging apps, and other online services. Facebook needs to offer a diverse range of features and services to remain competitive.
- Rivalry Among Existing Competitors: The rivalry among existing competitors is intense, particularly in emerging markets where local players like Tencent have a strong foothold. Facebook needs to adopt a more localized strategy to compete effectively.
Furthermore, a SWOT analysis reveals Facebook's strengths, weaknesses, opportunities, and threats:
Strengths:
- Global reach and brand recognition
- Strong user base and network effects
- Extensive data and analytics capabilities
- Advanced technology and infrastructure
Weaknesses:
- Limited understanding of emerging markets
- Difficulty adapting to local cultural nuances
- Lack of localized content and services
- Perceived lack of privacy and data security
Opportunities:
- Expanding into new markets, particularly in Asia
- Investing in mobile-first experiences
- Developing localized content and services
- Leveraging social commerce and e-commerce capabilities
Threats:
- Growing competition from local players like Tencent
- Regulatory challenges and data privacy concerns
- Potential for user backlash against data collection practices
- Shifting user preferences and technological trends
4. Recommendations
To overcome these challenges and compete effectively with Tencent, Facebook should implement the following recommendations:
1. Adapt Business Model to Local Markets:
- Localization: Invest in translating interfaces, developing culturally relevant content, and tailoring features to specific market needs.
- Partnerships: Form strategic alliances with local businesses, influencers, and content creators to build trust and credibility.
- Mobile-First: Prioritize mobile experiences, recognizing that mobile devices are the primary access point for internet services in many emerging markets.
2. Prioritize Mobile-First Experiences:
- Develop Native Apps: Invest in developing dedicated mobile apps for specific markets, offering a more seamless and personalized user experience.
- Optimize for Mobile: Ensure that all Facebook products and services are fully optimized for mobile devices, including website design, app functionality, and content delivery.
- Mobile Payment Integrations: Integrate local mobile payment systems to facilitate transactions and encourage social commerce.
3. Invest in Localized Content and Services:
- Content Partnerships: Partner with local media outlets, publishers, and content creators to provide relevant and engaging content.
- Local Communities: Foster the development of local communities and groups within Facebook to encourage user interaction and engagement.
- Language Support: Offer comprehensive language support for all Facebook products and services, including customer service and technical support.
4. Strengthen Social Commerce Capabilities:
- E-commerce Platform: Integrate a robust e-commerce platform within Facebook, allowing users to buy and sell products directly through the platform.
- Payment Integration: Partner with local payment gateways to facilitate secure and convenient online transactions.
- Marketing Tools: Provide businesses with tools and resources to promote their products and services on Facebook, driving sales and revenue.
5. Embrace Localized Approach to Corporate Social Responsibility:
- Community Engagement: Support local initiatives and non-profit organizations to demonstrate commitment to social responsibility and build goodwill.
- Ethical Data Practices: Implement transparent and ethical data collection and usage practices to address privacy concerns and build user trust.
- Diversity and Inclusion: Promote diversity and inclusion within Facebook's workforce and leadership, reflecting the cultural diversity of its user base.
5. Basis of Recommendations
These recommendations are based on a comprehensive understanding of Facebook's strengths and weaknesses, the competitive landscape, and the unique characteristics of emerging markets. They are consistent with Facebook's mission to connect people and build communities, while also addressing the challenges posed by Tencent's dominance in Asia.
The recommendations are also grounded in the following considerations:
- Core Competencies and Consistency with Mission: The recommendations leverage Facebook's existing strengths in technology, data analytics, and global reach while adapting its approach to align with local market preferences.
- External Customers and Internal Clients: The recommendations prioritize user experience, cater to the needs of local businesses, and empower Facebook employees to contribute to the company's success in emerging markets.
- Competitors: The recommendations directly address the competitive threat posed by Tencent, focusing on areas where Tencent excels, such as mobile-first experiences, localized content, and social commerce.
- Attractiveness: The recommendations are expected to improve Facebook's market share, revenue, and profitability in emerging markets, ultimately enhancing the company's overall financial performance.
6. Conclusion
By implementing these recommendations, Facebook can effectively compete with Tencent in emerging markets by adapting to local cultural nuances, prioritizing mobile-first experiences, investing in localized content and services, strengthening its social commerce capabilities, and embracing a more localized approach to corporate social responsibility. This strategy will enable Facebook to achieve sustainable growth and maintain its position as a leading social media platform in the global market.
7. Discussion
Other alternatives not selected include:
- Acquiring a local competitor: This could be a quick way to gain market share, but it carries significant financial and integration risks.
- Focusing solely on developed markets: This would be a less ambitious approach, but it could lead to missed opportunities in emerging markets.
Key assumptions of the recommendations include:
- User demand for Facebook's services: The recommendations assume that users in emerging markets will be receptive to Facebook's products and services.
- Government regulations: The recommendations assume that Facebook will be able to navigate the complex regulatory landscape in emerging markets.
- Financial resources: The recommendations assume that Facebook has the financial resources to invest in localization, content creation, and technology development.
8. Next Steps
To implement these recommendations, Facebook should:
- Establish a dedicated team: Create a team of experts focused on emerging markets, with expertise in local languages, cultures, and business practices.
- Develop a pilot program: Launch a pilot program in a select few emerging markets to test and refine the recommended strategies.
- Monitor and evaluate progress: Continuously monitor the effectiveness of the implemented strategies and make necessary adjustments based on performance data.
By taking these steps, Facebook can successfully navigate the competitive landscape in emerging markets and unlock significant growth opportunities.
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Case Description
Entering 2017, Tencent and Facebook are reinventing their business models in areas including social media, e-commerce, fintech, gaming, mobile, IoT and VR, among others. The case illustrates the advantage of platform business models over pipeline models or a traditional product focus. It unveils the power of Chinese accelerated innovation and demystifies so- called Chinese "copycat" culture. It also shows how the two tech giants Facebook and Tencent have applied different business models and acquisition strategies, which to a large extent have been conditioned by social, geopolitical and regulatory issues. In showing that Tencent excels in multiple areas when benchmarked against Facebook, another case objective is to encourage students to challenge widely held beliefs that Chinese companies cannot innovate or are incapable of being global players. The case also reveals challenging aspects of doing Internet business in China, including the country's business culture, as well as the Great Fire Wall and how it boosted the Chinese economy, making it difficult for Western technology firms to enter.
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