Facebook VRIO Analysis

Author- | Posted- | Updated: April 17, 2020 |

Facebook apart from being a leading social media network is also the favorite stop of social media marketers. It affords immense reach, a very large audience, and competitive pricing apart from great technological features that make it easier for marketers to reach their desired customer segments throughout the world. Facebook has seen rapid growth in recent years driven by the growth of 4G technology and increased use of smartphones in the Asia Pacific region. A lot of its growth in the past year mainly came from the Asia Pacific. The number of Monthly Active Users of Facebook is higher than 2.5 billion now. In 2019, the company also enjoyed impressive growth in its revenue. It generates substantially all of its revenue from digital advertising.  Growth in audience size, as well as increased user engagement, have driven the growth of Facebook last year. However, while competition has been intensifying and Google is still in a significant lead compared to Facebook, the social media giant is focusing on making its product more engaging to grow its revenue. While competition from YouTube, other social media channels as well as other types of online entertainment services and gaming has grown, Facebook still has a strong competitive advantage which will continue to fuel its growth in the longer term. In this VRIO analysis of Facebook, you will read about the leading resources and capabilities of the company which have helped it achieve sustainable competitive advantage and retain its leadership position.

Leading Resources and Capabilities of Facebook:

Global Presence:

Facebook enjoys global popularity and its audience from the emerging markets has grown during recent years driving higher growth in revenue. Its global accessibility is a critical source of competitive advantage which brings marketers flocking to the platform for marketing and promotions of their products and services. Marketers can promote their products to a global audience and target customers in any part of the world using Facebook. So, in terms of reach, facebook’s capabilities are matchless. Millions from across the globe everyday access the platform on laptops or internet-enabled mobile devices.

Large Audience size:

Facebook’s overall audience has undergone impressive growth during recent years and the company has seen a rapid surge in its users from the Asia Pacific region. The number of monthly active users on Facebook is higher than 2.5 billion. Whether targeting a small market segment or trying to reach a global audience for your online brand, Facebook offers matchless reach. The large audience size of the social media network is a critical source of competitive advantage for the brand and a large number of brands and marketers flock to the platform to promote their products and services before a global audience.

Financial strength:

The strong financial position of Facebook is also a critical source of competitive advantage for the brand allowing it to spend more on research and development as well as marketing and sales. The company places a heavy focus on research and development in order to make continuous improvements to its various products and make them more engaging. Its free cash flow in 2019 reached $20.7 billion. The company invested around $10 billion in marketing and sales. Apart from that it also spent $13.6 billion on research and development. Facebook generates substantially all of its revenue from digital advertising. In 2019, the revenue of Facebook climbed past $70 billion and more than $69 billion came from advertising. In this area, Facebook is the leading competitor of Google and a large part of its digital advertising revenue is now coming from mobile channels.

Technological innovation:

The business of tech giants like Facebook and its competitors depends heavily in research and development since competition has grown highly intense and continuous investment in R&D is important to grow the level of user engagement. If Facebook has enjoyed an impressive rise in its revenue then the reason can be partially attributed to the higher user engagement it has achieved through improvement in various functions and features. Customer experience is an important focus for the tech giant. However, it is also investing in technological innovation to grow the rate of return that marketers buying ad placements on Facebook enjoy. A large number of new competitors of Facebook have emerged from unknown corners. Apart from the other social media channels like YouTube and Twitter, Facebook is also facing increased competition from streaming services like Netflix and Hulu as well as gaming services. The result has been a higher focus on research and innovation to grow the attractiveness of its product portfolio.

Complementary product range:

The product range of Facebook is not limited only to Facebook but the company has expanded its product range through acquisitions. Through acquisitions, the company has grown its product range to include Instagram, WhatsApp, and Oculus. While currently, its main source of revenue is Facebook advertising and the revenue from other sources is insignificant still the other products in its product range have helped the company grow its popularity and brand awareness worldwide. 

Brand awareness:

Facebook’s brand awareness is unquestionably very high which is a result of the company’s focus on user experience. The company has continued to invest in user experience to find faster growth and expand its user base from around the world. Higher brand awareness has also resulted in higher worldwide sales and faster growth in advertising revenue.  However, the company also invests in marketing and sales to expand its user base, grow engagement and achieve higher popularity as well as a stronger reputation. All these things are essential to retain its competitive position in the industry. Apart from the other things, Facebook invests in CSR and sustainability to maintain a stronger social image than its competitors.

Organizational Culture & HRM:

Facebook is an innovative technology company. However, since its initial days, the company is also known for its extraordinary focus on human resource management and organizational culture. Apart from competitive compensation, the company also uses a wide range of nonfinancial measures aimed to drive higher staff motivation, grow retention rate and attract talented people to the organization. Innovative HR management at Facebook has led to higher staff satisfaction and employee engagement which are both great for driving improved performance and higher productivity among the employees.

Resources/CapabilitiesValuableRareInimitableOrganized
Global PresenceYesYesNoYesCompetitive Parity
Large AudienceYesYesNoYesCompetitive Parity
Financial StrengthYesYesNoYesCompetitive Parity
Technological InnovationYesYesYesYesCompetitive Advantage
Product RangeYesYesNoYesCompetitive Parity
Brand AwarenessYesYesYesYesCompetitive Advantage
Organizational Culture & HRMYesYesNoYesCompetitive Parity
FACEBOOK VRIO.
Abhijeet Pratap

Abhijeet has been blogging on educational topics and business research since 2016. He graduated with a Hons. in English literature from BRABU and an MBA from the Asia-Pacific Institute of Management, New Delhi. He likes to blog and share his knowledge and research in business management, marketing, literature and other areas with his readers.