BUSI271 Global Strategy: Analysis and Practice

Individual Report

Student: Kayumova Karina

Student ID: 001140420

 Introduction

This individual report based on the article review by Richard Waters and Chris
Nuttall. Numerous actual theories related to the case will be discussed in this
study. In first section provided brief information about article including the article
source. In second section illustrated description of the company mentioned in the
article, specifically Meta(Facebook), a social networking behemoth, and
Instagram, a rapidly growing internet photo-sharing mobile application. The main
focus of this essay is Facebook's early 2012 acquisition of Instagram. The third
section of this study contains a summary of the article. Fourth part of this paper
will describe the principle of diversifying through the acquisition of businesses in
related industries that are relevant to the article discussed in this report. Lastly, the
project will be concluded with a summary of the project's most significant findings
and the writer's assessment of the case.

About Article

The article which interact my attention was posted in Financial Times on 9 of

April 2012. It is written in collaboration by American Technology Media and
Telecoms news editors Chris Nuttall and Richard Waters who focused on tech
industry and impact of technology. The heading of the article is “Facebook to buy
Instagram for $1billion”. The following link to the original source provided:
https://www.ft.com/content/052cc7c4-8269-11e1-9242-00144feab49a

Meta(Facebook) Background

Facebook is the biggest social media and networking website in the world was
founded in America at 2004 by Mark Zuckerberg and owed by Meta platforms.
Recently Facebook has changed its name to Meta which reflects the company's
goal to create an avatar-filled virtual world known as the metaverse.

This article discusses two

significant companies: Facebook,
now known as Meta, a social media
company, and Instagram, a rapidly
growing online photo-sharing
service. Facebook is a publicly listed
technology company with its
headquarters in Menlo Park,
California. The company owns several subsidiary companies, including Facebook,
Instagram, and WhatsApp. (Facebook, 2021) Facebook is one of the world's most
valuable companies and is regarded as one of the United States of America's major
technology companies. (Lekkas, 2020)
Facebook filed for an initial public offering on January 1, 2012. (IPO). As per the
prospectus supplement, the business required $5 billion in additional funding and
declared to have 845 million monthly active users and a webpage with 2.7 billion
everyday comments and likes. (Erickson, 2012)

Source: Orbis
Instagram is a social networking service for sharing photos and videos formed by
Kevin Systrom and Mike Krieger in the United States. Facebook purchased the
platform in April 2012 for estimated US $1 billion. Users can upload images which
can be modified with filters and structured using hashtags and geotagging.
Instagram began as an iOS app in October 2010 and quickly grew in popularity,
reaching one million registered members in two months, ten million in a year, and
one billion in June 2018. As of October 2015, there had been over forty billion
photo uploads. While Instagram has been lauded for its influence, it has come
under fire for a variety of reasons, including its negative effect on teenagers'
psychological health, legislation and constant updating, accusations of censorship,
and user-uploaded illegal or improper content. (Tech Crunch, 2018)

Main outcomes

The business strategies implemented by a company are key components that

might aid in the enhancement and strengthening of the company's performance. It
has the ability to build competitive benefits which are more significant than the
global market, resulting in prolonged commercial success that helps the Firm's
longevity, continuity, and profitability over the long term. (Abdulwase et al., 2021)
Meta(Facebook) pursues an all-encompassing approach and aggressive growth
strategy that places a premium on the efficiency and accessibility of online social
media services in order to maintain a company's competitive benefit. (Dess and
Davis, 1984)
Meta(Facebook) follows a business strategy of diversity and structure through
multiple businesses as well. Since its inception, Facebook has been expanding and
integrating its operations, primarily through acquisitions and mergers. Mergers and
acquisitions have grown in popularity in recent years, with their numbers
dramatically increasing in the United States, Europe, and other regions of the
world. (Calipha, Tarba and Brock, 2010)
When one firm acquires a controlling interest in another business, a corporate
affiliate of another business, or local resources or assets of some other business,
such as a production facility, the process is known to as an acquisition. Thus, an
acquisition could be characterized by the accumulation of an asset by another
business, such as a plant, a division, or even an entire organization. (Soundarya,
Lavanya and Hemalatha, 2019)
Acquisitions are crucial to a business's strategy. Acquisitions might be beneficial
in a number of ways, including growing market power, attaining scale and scope
economies, broadening the base of expertise, and increasing access to
complementary assets. (Anand and Lee, 2016)
Merging is the union of two or more business entities that result in the continued
functioning of a single enterprise. Merging is the combining of two businesses in
which one survives and the other dies. During the merger operation, the purchasing
firm receives the merged company's assets and liabilities and maintains its
legitimacy. (Soundarya, Lavanya and Hemalatha, 2019)
Meta(Facebook) has a long history of acquiring businesses and integrating them.
Additionally, Meta(Facebook) has acquired over 78 additional businesses,
including Instagram, over the last 15 years. In 2012, Facebook acquired Instagram
for $1 billion, a staggering sum at the time for a company with only 13 employees.
(IANS, 2020)

Several of Facebook's significant acquisitions are listed below:

 Instagram
 WhatsApp
 Oculus VR
  com
 LiveRail
 Threadsy

(Hallman, 2020)

The article focuses on Facebook's acquisition of Instagram. Instagram is a social

media platform for photo and video sharing that was founded in 2010 by Kevin
Systrom. Instagram launched on Oct. 6, 2010, and quickly gained 25,000 users in a
single day. From the start, the app's primary focus was on photographs, particularly
those captured on mobile devices. In March 2012, the app's user base had
surpassed 27 million. Instagram was published for Android phones in April 2012
and was downloaded over one million times in much less than a day. (Blystone,
2020) According to the data above, Instagram was an extremely successful
company even before it was acquired by Facebook. This was indeed a significant
factor in Facebook's decision to acquire Instagram.
After being accumulated by Facebook, Instagram enhanced its user features and
is now a major social networking site connecting people from all over the world.

The app enables users to upload

photos and videos which can be
modified with filters as well as
organized using hashtags and
geotagging. Public posts can be
shared with all followers or even
with pre-approved followers. Users
can browse the content of other
users using tags and locations, as
well as view trending content. Users can add one‘s content to an individual feed by
liking photos and following other users. (Hutchinson, 2019) (Instagram, 2021)
The foregoing developments have been made possible by Facebook's technical
capabilities. Several of the features are even similar to those found with in
Facebook app. This demonstrates the clear advantage of acquisition.
If we consider Facebook's market capitalization, it was 63.14 billion dollars in
2014 and will reach 926.65 billion dollars in end of 2021. This demonstrates
unequivocally that Facebook's acquisition strategy has been successful.
(Companies Market Cap, 2021)
Source: Orbis
When we examine Facebook's acquisitions over the last few years, we see that
the majority of its takeovers were in the "talent acquisition" bracket, and attained
companies are often shut down. The practise of talent acquisition is the acquisition
of a business mainly for the reason of recruiting its professionals and staff, rather
than acquiring possession of its services and goods.  This is also demonstrated by
Mark Zuckerberg, the CEO of Facebook, in a 2010 statement "We have never
acquired a business purely for the purpose of growing the busines company. We
acquire businesses in order to recruit exceptional employees... Making sure that we
employ the most suitable individuals possible is a critical aspect of establishing an
entrepreneurial mindset. One way to accomplish this is to focus exclusively on
acquiring great companies with great founders." (Biz Buzz, 2010)

When Meta(Facebook) purchased

Instagram in 2012, we saw a shift in the
acquisition pattern. This is an example
of a product-focused acquisition. Other
notable product-focused acquisitions by
Facebook include the 2014 acquisition
of WhatsApp and the 2014 acquisition
of Oculus VR. Acquisition with a
product focus describes the process of obtaining a business or an organization with
the primary objective of acquiring a company or a line of products, either
implicitly or explicitly.
 If we categorize Facebook's acquisition methods over the years, we can conclude
that the company has primarily used two methods: horizontal acquisition and
congeneric acquisition. (Goedhart, Koller and Wessels, 2017)

Summary
As a conclusion I can say that Meta(Facebook) has a well-planned business
strategy since the start of their company. They have engaged in a diversifying
business strategy right from the launch of their company. They are more focussed
and adding value to the company through increasing their human resources rather
than investing in other assets. That’s why in their initial year they have invested
heavily on acquiring many tech start-ups as a talent acquisition. These methods are
highly effective in the long term. This results in gathering a very effective
workforce under one company working towards one main target which was the
case with Meta(Facebook). This resulted in Facebook growing rapidly as a
company almost doubling their market capital each year. Once they have stabilised
as a company Meta(Facebook) has decided to acquire product focused acquisitions.
Now that they have established a highly effective workforce under their company
Meta(Facebook) is now ready to diversify their business into other congeneric
fields. This is what is seen and discussed in the article of Meta(Facebook)
acquiring Instagram. This can be categorised as a product based congeneric
acquisition.

Reference list

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