Generic and Intensive Strategies of Facebook

Facebook is the largest social media network after YouTube and a favorite of social media marketers and brands worldwide. It boasts of a very large number of active users running billions, Facebook also offers a large number of tools that marketers can use to reach their desired customer segments worldwide. It is also a leader in digital marketing and right behind Google in this area.  In terms of mobile digital advertising, which is a large source of revenue for Facebook, it is a leading competitor of Google. In December 2019, the number of active daily users of Facebook reached 1.66 billion. Its number of monthly active users also reached 2.6 Billion in December 2019. Net revenue of the social media brand grew to $70.7 billion in fiscal 2019 which was 27% higher than the previous year. A very large part of its total revenue( around 98.5%) came from advertising. The total advertising revenue of Facebook grew to $69.66 billion in 2019. The global growth of Facebook as one of the world’s leading social media brands is based on technological innovation. You will learn about the generic and intensive strategies it adopted to find faster global growth.

Generic strategies adopted by Facebook:

There are three generic strategies given by Michael E. Porter which include cost leadership, differentiation, and focus. Cost leadership is the strategy of leading on the basis of cost like Walmart does where it is the market leader in the retail industry in terms of pricing. The second strategy is that of differentiation where you create an outstanding and sufficiently differentiated product to win the market.  For example, Apple has followed the strategy of technological differentiation to create an iPhone that is outstanding in terms of features and performance and caters to the higher end of the market. The third strategy is the focus strategy which has two subdivisions – cost focus and differentiation focus. Cost focus is when you reach a specific market segment through a cost leadership strategy. Differentiation focus targets a specific market segment through differentiation. The generic strategy adopted by Facebook is a mix of cost leadership and differentiation mainly. While the business model of Facebook is not entirely built around the cost leadership proposition, it also offers distinct cost advantages.

Cost leadership:

Cost leadership is not the core strategy used by Facebook since it does not mainly focus on providing low-cost options compared to its competitors. However, it is definitely an advantage that Facebook offers. Other social media platforms like YouTube, Twitter and LinkedIn also offer some similar advantages. However, when it comes to having low-cost marketing options, Facebook is the leading social media channel that the marketers prefer. You can access a large segment of consumers and use the free options to promote your brand and products and engage a very large number of followers on the social media network without virtually paying anything. Marketers also have the option of paid advertising on the social media platform. However, compared to other online advertising channels. Facebook uses a competitive pricing strategy. So, the competitive strategy adopted by Facebook is only partly cost leadership.

Differentiation:

Differentiation is the main competitive strategy adopted by Facebook to grow popularity, customer base as well as sales and revenue. Facebook enjoys very high popularity all over the world which is mainly because of its differentiated and outstanding features that attract users of all ages. It is not just the young people, but Facebook also boasts of a large customer base of people in their middle ages. A large number of business brands from around the world also use Facebook for promotions and customer engagement which is because the technical features of the platform are most suited for marketing and customer engagement. There are more social media platforms like YouTube, Twitter and Linked In also but Facebook has carefully differentiated itself from them.  

Intensive strategies used by Facebook:

There are three intensive strategies given by Michael E Porter including market penetration, market development, and product development. Market penetration is the strategy of selling more to your existing customers in a specific market. Market development, on the other hand, is the strategy of entering new markets to gain higher sales and revenue. Product development strategy focuses on developing new products to grow sales and revenue. All three are effective strategies for market expansion and can be used in combination to achieve higher growth. However, the main strategy that Facebook has adopted is that of market penetration. 

Market penetration:

It is the strategy of selling more to your existing customers. Over the past several years, Facebook has focused on growing custom engagement and making its platform and products more attractive. This has helped the company improve its user base and find solid growth in recent years. Facebook is a global platform and offers worldwide access to users of all age and income groups. As more and more users access the internet each year, the user base of Facebook also continues to grow. So, in order to find growth, the company focuses on adding more users to engaging existing users better from its existing markets.

Market Development:

Market development is the strategy of entering new markets to grow the customer base. However, Facebook had utilized this strategy during its initial phase of growth before the brand was worldwide popular. Now, it has already entered every market worldwide and so market development strategy does not work for Facebook anymore. 

Product Development:

The product development strategy is the strategy of releasing new products and selling them to your existing customers. However, Facebook is a social media brand and not an FMCG brand or electronics brand. So, product development is also not a major option for it. The company continues to improve its existing products and add more features but Facebook and online advertising continue to remain its main source of revenue.

Other sources:

Facebook Annual Report 2019.

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.