Company Analysis: Facebook, Inc.
Merlinda C. Lucas
Global Economic Environment
Instructor: Lester Hadsell
The Coffee Crisis case study illustrates how the decline in coffee consumption and the rise of coffee production was addressed by the governments of coffee producing countries in 2004. The coffee market was identified, defined and explained in the context of both international nature and structure. The new entrants into the coffee market were identified and examined. A supply and demand analysis was conducted to address what the shift factors were and what were some of the changes in consumer behavior. It was concluded some of the remedies presented by the ...view middle of the document...
A microeconomic analysis of Facebook, will also follow, that will cover: allocation of resources, how the relative price of goods/services are determined, product/factor pricing, economic efficiency of consumption/production/distribution and over costs/pricing and various factor markets. We will further present a macroeconomic analysis that will consist of: global connection, impact of business cycle, sensitivity to monetary/fiscal policy and interest rates, cyclical nature of Facebook, determination of income, employment and general price levels. Some ethical & regulatory considerations will also be reviewed below, along with recommendations.
Facebook is under the technology sector as part of the internet service provider (ISP) industry. Facebook, Inc. is currently ranked #7 in market cap ($59.3) in the internet service provider industry, which provides access to the Internet via wired and wireless connections. On May 18, 2012, Facebook became a publicly traded company, the annual report filed was the first filed for this company. “The US Internet service provider (ISP) industry generates combined annual revenue of about $50 billion. Low growth is forecast for the next two years, driven by social networking (Facebook) and broadband development in rural and underserved areas” (First Research, 2013). Demand in this industry is driven by consumer and business requirements for information. ISPs are in the business of transporting information and creating environments where this information can be accessed and shared. The key elements of profitability for ISPs are contingent on efficient operations and good marketing. Both of which have been successfully implemented by Facebook, with their reported $392 costs of sales and marketing, (but $232 million of that was stock-based compensation) so Facebook only spent about $160 million on promotion and sales (Edwards, 2012). “Major products of ISPs are Internet access, website design and hosting, and technical support services” ” (First Research, 2013).
Facebook, Inc. is in the internet information provider industry alongside Yahoo! Inc., Google, Inc. amongst others. Facebook, Inc. operates as a social networking company worldwide. It builds various tools and web-based services that enable users (people) to connect, share, discover, and communicate with each other on mobile devices and computers all over the world. The company’s Facebook Platform is a set of development tools and application programming interfaces that enables developers to integrate with Facebook for creating social apps and Websites. As of December 31, 2012, it had 1.06 billion monthly active users and 618 million daily active users (Facebook, 2012). The size of their user base and their users’ level of engagement are critical to their success. If users do not perceive their products and utilities to be useful, reliable, and trustworthy, Facebook may not be able...