Facebook: Connecting People Globally - Big 4 Tech Org

Facebook is an American social networking service and online social media organization located in California, established by Mark Zuckerberg. Alongside Apple, Google, and Amazon, it is regarded as among the Big Four technology organizations (Lillqvist, and Louhiala-Salminen, 2014: 3). The Facebook company constantly iterates, solves problems, and work together towards connecting people globally (Guedes et al. 2016: 43). According to Jacobs, Cobb, Abroms, and Graham (2014: 3), the organization's vital principles include giving people a voice, even if it means defending the rights of those they do not agree with. Facebook also focuses on serving everyone by ensuring technology is accessible to all people (Hanna, Kee, and Robertson, 2017: 2). In addition, Facebook promotes economic opportunity while also keeping people safe and safeguarding their privacy (Rader, and Gray, 2015: 173). This case study focuses on the risks facing Facebook Company and the relevant business models applicable in solving these risks.

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This report is divided into three key parts: the first part focuses on the introduction, where key ideas are analyzed, and the general flow of the paper is provided. The second section focuses on the Case Business Model, where key features of BM are identified. The third section emphasizes on risks of Facebook, understanding its source and nature, explaining why it is a risk, and identifying factors that shape it. The fourth section focuses on risk analysis, where the identified risk is explored into details and proper ways of ensuring it helps Facebook achieve its desired success levels. The final section is on the conclusion where the main information from the paper is summarized, providing a future for the study. A business model (BM) assists companies in figuring out its elements such as business concept, creating customer value, staying competitive, and all costs and revenue that the business anticipates.

Case Business Model

A business model is made up of four main components, namely the Value Proposition, Value Architecture, Revenue Model, and Products or Service (Gassmann, Frankenberger, and Csik, 2014: 1). Value Proposition (VP) defines the advantages that a client obtains from the BM (Osterwalder, Pigneur, Bernarda, and Smith, 2014: 81). The stakeholders addressed in the VP are customers and value partners. Products or Services are the connection between the clients and the organization. Products or services achieve VP and produce the promised advantages to clients. Value Architecture creates the promised benefit to clients in effective ways (Hsu, Fournier, and Srinivasan, 2016: 261). The Revenue Model focuses on the sources that the organization uses in the generation of its revenues (Amit and Zott, 2014: 5). Facebook has various sources of revenue which make up the revenue mix.

Facebook Value Proposition

In 2013, the Value Proposition (VP) of Facebook Company was creating a connected and open world. In the past, Facebook defined itself as a social utility helping people in effectively communicating with family, coworkers, and friends (Bagienska, 2018: 307). Facebook created technologies that facilitated information transfer using digital mapping and social graphs (Pawar: 56). Facebook's major benefits include connecting and sharing with friends, discovering and learning, expressing oneself, and staying connected everywhere.at the same time, Facebook has VP for businesses and markets. Facebook Inc. works hard towards monetizing its audience, especially because of its Initial Public Offering (IPO) nature since 2012 (Lanchester, 2017: 3). This marked the largest IPO for an internet organization, where Facebook claimed it enabled marketers to engage over a billion active users monthly. Facebook provides marketers with unique combinations of relevance, reach, engagement, and social context for the enhancement of the value of their advertisements.

Risks in Business Models

In the context of BMs, risks are inherent to all businesses because sometimes the assumptions that Facebook makes could become wrong. Some of the risks are present in the consumer response. For instance, Facebook can decide on using most of its marketing resources in developing a single revenue source it believes has the most potential (Santos, Pache, and Birkholz, 2015: 56). Regardless of the effectiveness of the marketing of the product, risks are present that the target audience does not positively respond to the product as anticipated by the management board. Sometimes the products do not match the needs of the clients. Another risk is present in response to competitors (Roome, and Louche, 2016: 11). According to Parida, Sjodin, Wincent, and Kohtamaki (2014: 52), in the BM, operational factors increase the profitability of a company. Prices charged for services or products of Facebook have significant effects on the margins. Risks to Facebook's BM are that rival organizations such as Instagram reduce their prices, compelling the organization into matching the lower prices to retain their clients (Upward, and Jones, 2016: 97). The third risk is to the BM is present in the assumptions on cost estimations.

BM defines cost factors that ensure the profitability of a company. Sometimes, Facebook underestimates the costs in its BM. Risks in the business model are also present in the changing business environment. Facebook could figure out the best approach to ensuring profitability, but the organization still loses funds (Taran, Boer, and Lindgren, 2015: 301). This does not only happen because of poor implementation of business strategy but the unexpected and quick negative changes to the economic environment. In these situations, clients are cautions over spending money, postponing the use of the social media platform until it improves. In coping with the harsh economic conditions, Facebook has tried making some changes to its business model to address the risk of data localization (Bocken, Short, Rana, and Evans, 2014: 42). The next section explains the risk of data localisation and how it affects Facebook's operations.

Data Localization Risk

Data localisation refers to the storage of information on any device that has a physical presence in the borders of a particular nation where the data was produced (Bauer et al. 2014: 5). The free flow of digital information, particularly data that affects operations of the government, is hindered by some states. Most governments focus on protecting and promoting security in inter-borders, thereby encouraging data localisation (Panday, and Malcolm, 2018: 512). Misguided policies about data localization cause adverse effects on citizens, Facebook, and the American economy. The localization of information needs better information technology infrastructure and strict measures on security for data linked to Facebook's business operations (Andreou et al. 2019: 2). Some people support data localisation because of the fears of loss of private data from hackers, especially in the solutions of foreign storage of information. Data localisation hinders the flexibility of the internet that would considerably pose risks to the BM of Facebook Company. According to Zuckerberg, Localizing Facebook information in India has significant risks. Facebook Company understands that allowing data localisation in one country could trigger demands from nations that are more authoritarian and could misuse citizen data.

Zuckerberg claimed that Facebook would not obey these laws and establish domestic data centres in military regimes where data is accessed forcibly. The CEO is ready to risk the business by shutting down in military-run nations when the organization is forced into locally storing data. While these laws could protect the privacy of users and data in nations that are ruled justly, localisation of data could also cause problems (Akter, and Wamba, 2016: 175). The issues are existent in those countries that use the military in accessing user data. This assists them in enhancing their surveillance capabilities, hunting rebels, and disrupting activism. The case that Zuckerberg was arguing about regarded the localisation of data in India, as requested by the country's prime minister. Norms of data protection must be about security standards and not if or not the data is localized (Sivarajah, Kamal, Irani, and Weerakkody, 2017: 263). Data localisation is good for most observers. However, others agree that the startup culture of India has been established on free-flowing information (Gandomi, and Haider, 2015: 137). The push of the government over Facebook's data localisation could increase hindrances against free data flow that has been the key to the success of the country's main companies. Some of the major concerns and risks identified by Facebook over data localisation are in the aspect of national security. Data localisation is directly connected to the national security, economic development, and sovereignty of India (Sicari, Rizzardi, Grieco, and Coen-Porisini, 2015: 146). Undoubtedly, data is integral to the digital economy, which supports the case for localisation. For the digital payments in India to grow, innovations and startups develop daily.

Data requires protection and not localisation. With companies and criminals realizing that data equals money, there is a steady rise of threats to the security of information, attacks, and scandals in recent times. In 2019, there were over 3,800 data breaches, which exposed 4.1 billion records of citizens in respective countries. These statistics marked rise in the 2018 data breaches where 54% of the records were exposed. There are more significant threats from private organizations and how they handle data, which led to the passage of the 2018 Personal Data Protection Bill. These are analyzed in the case of the scandal of Facebook-Cambridge Analytica that had huge political impacts (Cadwalladr, and Graham-Harrison, 2018: 5). Therefore, the fight of having control over data in India, passed through Facebook, shows the way China prefers looking at the internet and user information (Livingston, and Greenleaf, 2016: 3). Facebook-Cambridge Analytica scandal happened in early 2018, where Analytica was accused of personal harvesting information of millions of profiles of Facebook users without consent and used it for political reasons. The scandal was a watershed moment in how the public understood personal information and led to declines in the stock prices of Facebook and calls for stricter regulation of the use of personal information of the technology organizations.

With every passing day, digitization and technology have become the cause of major issues. The world is taking important steps in adopting digitization and technology in almost all aspects of life (De Hert, and Papakonstantinou, 2016: 179). Isaak and Hanna (2018: 57) claim that in the connected universe, data must freely flow across boundaries and borders. To this end, Facebook will not store information in areas where governments can forcibly obtain them. The move was one of the steps of winning over the trust of the investors and ensuring that they continued investing in the organization (Haucap, 2019: 2). Facebook considers data localisation as a risk. When Facebook is blocked in major countries, it hurts the business model of the company and its community. The principles of Facebook on data localisation are not new because they have always upheld these values (Vaidhyanathan, 2017: 2). To ensure the needs of users are met, Facebook has introduced different aspects concerning the usage of Whatsapp as a social media platform. Whatsapp has failed to comply with the regulations of data localisation in India. Zuckerberg addressed the question if the new privacy change meant that private applications would...