Running Head: EXTERNAL FACTOR EVALUATION MATRIX 1

Case Study – EFE Matrix and Recommendation for Strategic Decision Making

Student’s Name

College Affiliation
EXTERNAL FACTOR EVALUATION MATRIX 2

Facebook

Facebook is a multinational company founded by Mark Zuckerberg and is one of the

most popular social networking platforms. With more than 2.32 billion monthly active users,

the company has an excellent opportunity to grow amidst its competitors (The Statistics

Portal, 2019). However, the company is affected by external factors that consist of

opportunities and threats. Using the EFE matrix, different opportunities and threats are

addressed with appropriate recommendations for the company.

External Forces

I. Economic

Facebook has a surprising amount of influence on the global economy. A study

conducted by Deloitte, commissioned by Facebook came to a total of $227 billion in total

global economic impact in 2014 (Rieder, Abdulla, Poell, Woltering & Zack 2015). Barring a

radical shift in the modern economy that makes social media and the human need for

connection cease to exist in its current form, Facebook is in a unique position where the

company has more influence over the economy than the economy has on its business

operations, however, its biggest threat is legislation. Considering the legal/political aspect,

the current negotiation between the US government and Facebook is a primary example of

this. Due to a 2011 violation of the Federal Trade Commission (FTC) agreement regarding

user privacy, the company faces a multi-billion dollar fine (Reuters, 2019). The substantial

loss of capital could influence the company's weight in the economy.

II. Social

Controversially, the case of 2011 violation of an FTC agreement is the most

significant social factor that could affect Facebook. Major scandals concerning user data,

privacy and the 2016 election tampering have all left people questioning allowing their data
EXTERNAL FACTOR EVALUATION MATRIX 3

and person to exist on the social network. Losing users is a big blow to the company’s

income (Wagner & Molla, 2018). This becomes more significant as the user base of the site

ages, potentially threatening the position Facebook holds in the online world.

III. Cultural

Culture is an exciting aspect where Facebook has different levels of influence on the

culture depending on location. While ubiquitous through the United States, Canada, Mexico

and South America; Facebook struggles to gain a foothold in Asia. This is especially true in

China, where the platform is banned (Pham & Riley, 2017). There are growing concerns that

even where Facebook thrives, it's not necessarily good for the culture or society. There was a

2013 study that showed evidence that the longer a person was on Facebook; the lower their

life satisfaction became (Kross et al., 2013). This sort of outcome could eventually drive a

cultural shift away from the service, lowering their impact on the culture and economy.

IV. Demographic

One of the biggest threats to Facebook is their dramatic drop in usage rates with

younger users. The percentage of users age 13-17 has been rapidly dropping since 2015,

down 71% to only 51% of US individuals in the age range using the platform (Solon, 2018).

This demographic change is bad news for the social media giant, with businesses continually

looking to get the 18-25 bought into their products. This would cause a massive loss of

marketing revenue for Facebook and cause severe damage to all other areas of their business

plans. The challenge of re-engaging the youth and teen segments of the population should be

a focus of Facebook in the coming years.

V. Political/Government/Legal

Government’s influence on Facebook can be witnessed in the case on FTC concerning

user data privacy issues in 2011. The platform's ban in China is another example of how the
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government and legal situations can have massive ramifications on the global presence of

Facebook. There are even current proposals by the US government regarding political

advertising taking place on Facebook (Stewart, 2018). Even laws concerning net neutrality

may have a financial impact on the company. Maintaining a healthy relationship and active

disclosure with governments around the world will be critical for Facebook avoiding

regulations and penalties that could cripple their operations.

VI. Technological

When Facebook started to become the giant, technology was being developed with

Facebook in mind. It’s hard to picture the Smartphone boom of today without Facebook users

and demand driving the advancement of the devices. With nearly the entire world having

access to Smartphones, tablets and computers that can utilize Facebook, the mission for full

market saturation is substantially completed. The company has also pioneered an advertising

platform that has helped thousands of companies get exposure to their prospective customers.

The platform created proved so influential that even the United States Presidential candidates

spent more than $70 million advertising on Facebook (Carlos III University of Madrid,

2018). This is an excellent example of the vast advertising and financial impact their

advances in advertising technology has.

VII. Competition

Although Facebook purchased Instagram in 2012, competition is still within the social

media networks especially with other platforms. Currently, Snapshots and twitter pose greater

competition (Cheung, 2018). The two social media platforms offer different experiences from

Facebook as the younger generation get along with them; hence, they are bigger threats

considering the changing demographics. Facebook has to change tactics to maintain its

competitive advantage.

OPPORTUNITIES THREATS
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Hacking your Profiles

Selling Items- cars, computers, furniture Safety Confirms-personal
etc. threats/stalking
Making connections with people Advertisers Leave
Investments- the stock market No new platform ideas
Business Marketing Google
Finding Careers Apple
Digital Ads for companies or products To many people hired for Facebook
Promote Campaigns Reputation Turns
News Delete Facebook Movement
Interments-stock market drops
Internal Factor Evaluation Matrix
Facebook

W
W R eighted
Key Internal Factors eights ating Score
1
0 , 2, 3
.0 to 1.0 or 4
3
Opportunities or 4
0 0.
Selling items-cars, computers, furniture etc. .01 3 3
0 0.
Making connections with people .01 3 3
0 0.
Investments- the stock market .05 4 2
0 0.
Business Marketing .05 4 2
0 0.
Finding Career .05 3 15
0 0.
Digital Ads for companies or products .05 4 2
0 0.
Promote Campaigns .06 3 18
0 0.
News Awareness .06 3 18
0 0.
Strong Brand Image .08 4 32
0 0.
Diversify sources of revenue .08 4 32

1
Threats or 2
0 0.
Hacking your profiles safety concerns-threats .04 2 08
EXTERNAL FACTOR EVALUATION MATRIX 6

0 0.
Advertisers leave .08 1 08
0 0.
No New Platform ideas .05 1 05
0 0.
Competitors .08 2 16
Facebook being banned due to losing the 0 0.
productivity of their employees .05 1 05
0 0.
To many people hired for Facebook .01 1 01
0 0.
Reputation Turns .05 2 1
0 0.
Delete Facebook Movement .08 2 16
0 0.
Interments- stock market drops .06 2 12

1 3.
Totals .0 16

One of the opportunities for Facebook is an investment in the stock market, and

although it may be risky due to fluctuations of currency, it can lead to enormous gains for the

firm. Since the company can manage the risks involved in stock trading, it can invest more in

the stock exchange, thereby helping in wealth creation, product diversification, financial

growth, and increasing capital investments (Rieder et al., 2015). Investing in stock is an

excellent opportunity that the company should never ignore since it can give high returns on

capital.

Another opportunity is business marketing that will allow Facebook to sell its

products to other companies. The company has several occasions, as firms need to advertise

their products using Facebook as a platform (The Statistics Portal, 2019). The company can

trade with thousands of businesses globally to market their content through the placement of

ads on Facebook articles and audience network. The company can improve pages and vents

to assist local ventures to grow. This will make it possible for businesses to make connections

with clients on Facebook and expand. Facebook needs to help enterprises to chat with

customers around the world by connecting in the platform.

EXTERNAL FACTOR EVALUATION MATRIX 7

Another great opportunity is investing in digital ads, which can be created from

mobile phones with new creative tools in the ads manager app. The introduction of a new

suite will help in building compelling ads from mobile gadgets (The Statistics Portal, 2019).

This is an excellent opportunity for the company as businesses, and individual users will use

the tools for creating and managing campaigns. Besides, monitoring of ads is possible

anytime and edits images directly, which will save time and effort. Other developments that

will help Facebook related to digital ads are the text overlay that assists somebody to

incorporate text within the ads. Others include image cropper, templates, shapes, stickers, and

logos. People are enjoying using these features, and Facebook is gaining profits as users

spend more time on Facebook.

Facebook can also take advantage of Promotion Campaigns for other companies

interested in using the platform for advertisement. Companies such as Apple, Samsung, and

motor vehicle firms among others use the platform to advertise their products. Fashion

dealers also feature their products on Facebook to attract viewers and potential clients. The

company can consider this as a great opportunity since firms are turning to social media

marketing (The Statistics Portal, 2019). The prospect can generate billions of dollars per year

as firms try to reach millions of customers on Facebook. Campaigns have a greater chance of

creating more profit compared to other products of the company such as mobile ads.

Therefore, the management should consider focusing more on attracting more organizations

to place their marketing campaigns on Facebook pages.

Threats

One major threat of Facebook is the hacking of accounts, which leads to infringement

of privacy and confidentiality of the company. According to Facebook, hackers take

advantage of some vulnerability that includes "View As" feature that allows users to see how

their profile appears to other users (Wiederhold, 2018). Attackers can access other people's

accounts, and better approaches are needed to address the issue and promote security. The
EXTERNAL FACTOR EVALUATION MATRIX 8

cost is solving such as problem is high, as the company has to collaborate with the FBI to

investigate the criminals. The attackers are unable to access some content such as messages

in the Messenger, Oculus, and WhatsApp. Over 40000 accounts have been hacked which has

led to the theft of tokens (The Statistics Portal, 2019).

Lack of new platform ideas is another threat of Facebook since it is a sign of slow

innovation (Wiederhold, 2018). The company has many followers who need to look forward

to new apps and functionalities on the platform. However, the company needs to keep its

followers entertained and engaged by introducing new features. The CEO's dream of having a

neutral platform seems unachievable, as it is challenging to control what people to post on

issues such as politics. Another issue relates to Facebook reputation, which is at stake due to

data privacy issues as well as misuse. Data protection is robust, as the platform does not

guarantee complete safety of content posted (Thompson, 2012). Leakage of information

seems a big problem for this company and can lead to legal cases costly for the company.

Facebook needs to address the issue although it may be difficult to monitor and regulate what

people post.

Recommendations

The company needs to invest in matters related to integrity, especially with data

privacy. People are working to be successful in life, and the company is a target by criminals

such as cons, bullies, and thieves. Business people and employees succumb to blackmail by

cybercriminals. Such practices erode the trust of Facebook users and security need to be

heightened to regulate content that is posted. Offensive posts can be filtered and deleted to

protect the reputation of users. The company should find solving the hacking problem by

investing in reliable anti-hacking software (Rieder et al., 2015).

Another strategy that the company needs to adopt is an innovation by inviting talented

people to contribute to ideas that can improve the platform and attract more subscribers.

More thoughts on ways of enhancing the platform to increase its usability are essential. More
EXTERNAL FACTOR EVALUATION MATRIX 9

features such as those related to advertisement and marketing should be installed to attract

businesspeople in the platform (Rieder et al., 2015). The company will also be able to

compete well with other social networking sites such as Twitter and Instagram. The existing

features are helpful to the users, but some improvements are necessary to promote its

performance. The company management should take advantage of the opportunities that exist

in the industry to boost its performance through increased sales. For instance, investing in the

stock market will enable it to acquire more capital that can be used for more investment

opportunities. Finally, company must invest on research and development to gain more

insights particularly promotion and marketing.

EXTERNAL FACTOR EVALUATION MATRIX 10

References

Carlos III University of Madrid (November 20, 2018) Study analyzes the impact of targeted
Facebook advertising on U.S. elections. Phys.org. Retrieved from
https://phys.org/news/2018-11-impact-facebook-advertising-elections.html

Cheung, Bill (September 29,2018) Who Are Facebook’s Main Competitors? Investopedia.
Retrieved from https://www.investopedia.com/ask/answers/120314/who-are-
facebooks-fb-main-competitors.asp
Deloitte (January 2015) Facebook’s global economic impact. Delloite UK. Retrieved from
https://www2.deloitte.com/content/dam/Deloitte/uk/Documents/technology-media-
telecommunications/deloitte-uk-global-economic-impact-of-facebook.pdf

Gray, Alex & Hutt, Rosamond (September 12, 2017) This Chinese tech giant is now worth
more than Facebook. World Economic Forum. Retrieved from
https://www.weforum.org/agenda/2017/09/meet-china-s-social-media-giant-
everything-you-need-to-know-about-tencent/

Kross, Ethan; Verduyn, Philippe; Demiralp, Emre; Park, Jiyoung; Lee, David Seungjae;
Lin, Natalie; Shablack, Holly; Jonides, John & Ybarra, Oscar (August 14, 2013)
Facebook Use Predicts Declines in Subjective Well-Being in Young Adults. PLoS
ONE. Retrieved from
https://journals.plos.org/plosone/article?id=10.1371/journal.pone.0069841

Pham, Sherisse& Riley, Charles (March 17, 2017) Banned! 11 things you won’t find in
China. CNN Business. Retrieved from
https://money.cnn.com/gallery/technology/2016/05/23/banned-china-10/4.html

Reuters (February 14, 2019) U.S. negotiating multibillion-dollar fine with Facebook:
report. Reuters Business News. Retrieved from https://www.reuters.com/article/us-
facebook-fine/u-s-negotiating-multibillion-dollar-fine-with-facebook-report-
idUSKCN1Q333S

Rieder, B., Abdulla, R., Poell, T., Woltering, R., & Zack, L. (2015). Data critique and
analytical opportunities for very large Facebook Pages: Lessons learned from
exploring “We are all Khaled Said”. Big Data & Society, 2(2), 2053951715614980

Solon, Olivia (June 1, 2018) Teens are abandoning Facebook in dramatic numbers, study
finds. The Guardian. Retrieved from
https://www.theguardian.com/technology/2018/jun/01/facebook-teens-leaving-
instagram-snapchat-study-user-numbers

Stewart, Emily (April 10, 2018) What the government could do about Facebook. Vox
Media. Retrieved from https://www.vox.com/policy-and-
politics/2018/4/10/17208322/facebook-mark-zuckerberg-congress-testimony-
regulation
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The Statistics Portal (2019). Number of monthly active Facebook users worldwide as of 4th
quarter of 2018 (in millions). Retrieved from
https://www.statista.com/statistics/264810/number-of-monthly-active-facebook-users-
worldwide/

Thompson, D. (2012, February 02). Facebook's 10 Most Serious Threats, According to

Facebook. Retrieved from
https://www.theatlantic.com/business/archive/2012/02/facebooks-10-most-serious-
threats-according-to-facebook/252398/

Wagner, Kurt &Molla, Rani (February 12, 2018) Facebook lost around 2.8 million U.S.
users under 25 last year. 2018 won’t be much better. Recode. Retrieved from
https://www.recode.net/2018/2/12/16998750/facebooks-teen-users-decline-
instagram-snap-emarketer

Wiederhold, B. K. (2018). Are You Listening, Facebook? On Cybersecurity and Virtual

Worlds.