The Challenge Case “Facebook Positions Itself to Stay Relevant” and its related Challenge Case Summary were written to help you better understand the management concepts contained in this chapter. Answer the following discussion questions about the Challenge Case to better understand how strategic planning concepts can be applied in a company such as Facebook.

Data form “Facebook Positions Itself to Stay Relevant” 

In less than a decade, Mark Zuckerberg has transformed Facebook from a start-up social network for college students to an international corporation with more than a billion monthly active users, more than three-fourths of them outside the United States and Canada. In the company’s words, its mission is “to give people the power to share and make the world more open and connected.” But Facebook’s success depends on more than whether its technology empowers users. People must also linger on Facebook, thereby creating an audience for advertisements. Facebook’s popularity helped transform the way people use the Internet by making the experience a social one, with user-generated content. In so doing, Facebook became a key online destination. Today, two-thirds of Internet users in the United States and even more in Europe use Facebook. But challenges remain: Success attracts other innovators, who provide competing ways of engaging people online, and users’ tastes and interests change. One of Facebook’s hurdles is changing technology. In recent years, consumers have been buying powerful mobile devices and using them to stay in touch. Facebook was originally created for users who would sit down at a computer and perhaps spend an hour on a social network, playing games and buying items for the games. However, mobile users behave differently, posting a short status update or photo on Facebook and then moving on. Facebook was unprepared to offer a robust version of the site for mobile users, who then began switching to mobile friendly services such as Snapchat (for sharing videos and messages) and Twitter (for sharing brief messages). If mobile users want to play a game, they typically download the game app and skip Facebook altogether. Facebook reacted by hiring hundreds of software engineers to improve its software for mobile devices. It also retooled its approach for generating revenue to rely more on advertising than on games. In the early months of this approach, the company has begun to see growing numbers of mobile users and larger revenues from mobile advertising. Facebook has also begun to experiment with video ads. A Facebook news feed could be an attractive location for a video clip such as a movie trailer. If advertisers are interested, online video ads could begin competing with television, which charges about eight times as much for reaching the same-sized audience.

1. For Facebook’s managers, is acquiring a business such as Instagram a strategic management issue? Explain.

2. Give three factors in Facebook’s internal environment that managers should be assessing in determining the company’s organizational direction. Why are these factors important?

3. Using the business portfolio matrix, categorize Facebook’s recently acquired Instagram unit as a dog, question mark, star, or cash cow. From a strategic planning viewpoint, what do you  recommend Facebook managers do with Instagram, given this  categorization? Why?