Growth Through Acquistions: Facebook Case Analysis

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Growth through acquisition strategy: A study of Facebook Acquisition Strategies

Prepared for: Dr. Muhammad Mohiuddin.

Prepared by team# 1:

Ahmed Ghazi: T00538969

Abdul-Aziz Alqahtani: T00555128

Lila Alkhmis: T00534653

Oluwafemi Akinsanpe: T00538920

Takawira Windy Mutsago: T00556488

February 3, 2017

introduction

Facebook.Inc is an American online social media and social networking company based in Menlo Park, California. The company was formed by Mark Zuckerberg, a Harvard University dropout student along with his college mates Chris Hughe, Andrew McCollum, Dustin Moskovitz and Eduardo Saverin. Facebook went live online for the first time on February 4, 2004. Since its formation, the company has grown to be the leading online social networking media through a series of acquisitions of various size and magnitude that amounts to 61 in total. These acquisitions have been both vertical and horizontal. The acquisition of Instagram and WhatsApp by Facebook has proved to be very important strategic moves that have given the firm a competitive advantage in the industry.

OBJECTIVE

To study and analyze the importance of acquisitions as a corporate growth strategy for Facebook.

A corporate level strategy: specifies actions a firm takes to gain a competitive advantage by selecting and managing a group of different businesses competing in different product markets. 

SCOPE

• Study corporate and business level strategies of Facebook.
• Discuss different forms of acquisitions used by Facebook, and focusing on the horizontal acquisition.
• Analyze strategic reasons behind Facebook’s acquisitions.
• Discuss the importance and risks of Facebook’s acquisitions.
• Explore the main corporate level activities that leads to successful acquisitions

ABSTRACT

The use of acquisitions as a corporate strategy for growth has increased over the past decade yet evidence from many studies indicate that 70-90 percent of mergers and acquisitions fail. This paper explores the importance and effectiveness of acquisitions as a corporate growth strategy with a focus on Facebook. Inc. Facebook has acquired many companies with different sizes and different activities, the company has acquired more than 50 companies or properties since 2004. The success of Facebook through acquisitions seem to suggest that, well planned and executed corporate level acquisition strategies are key to value creation and growth.  This project is studying the impact of Facebook acquisitions to the firm’s financial performance, and net worth. Risks and threats of such acquisitions are issues that will be included in the analysis of this study. The 12th edition of the course book defines horizontal acquisition as, acquisition of a company competing in the same industry. Coincidentally, Facebook’s most important acquisitions are horizontal and based on the social-media competitiveness of the targeted firm. The study will explore the above and how acquired firms are successfully integrated into the Facebook Corporation.

METHODOLOGY

• Research design & Data collection

• Most the research will be qualitative, while few quantitative methods might be used to perform thorough analysis. Secondary data will involve collecting information from existing research conducted by other researchers as well as data from Facebook Corporation, web articles, case studies, and journals.

• Data Analysis

• Thorough review of secondary data will be done through secondary analysis. Secondary analysis involves the use of existing data, collected for the purposes of a prior study, to pursue a research interest which is distinct from that of the original work; this may be a new research question or an alternative perspective on the original question (Hinds, Vogel and Clarke-Steffen 1997).

• Strategy for Completing Project

• The project will be divided into different sections undertakings by different group members. Sections and subjects will be allocated to each member of the team. At the end, all the group members will get together to ensure that the project has been successfully completed.

LITERATURE REVIEW

In 2014, Facebook announced its plan to acquire WhatsApp. This was intended to help Facebook bring more connectivity and utility to the world by delivering efficient, affordable and robust internet services. This acquisition would accelerate growth and user engagement. Mark (Menlo Park, 2014)

Facebook targeted five growth areas to leverage on through the acquisition. These growth areas were mobile connectivity, user growth, young audience, engagement and mobile advertising. Facebook had set for itself ambitious strategic goals and since Facebook did not record the much anticipated success with its mobile App, it had to turn to WhatsApp who had recorded accelerated growth in the mobile communication space. WhatsApp had been dominating the mobile market space in many countries worldwide.  Given the growth trajectory of WhatsApp in its first four years of existence with over 400 million users, its acquisition was going to be a game changer for Facebook. It is estimated that about 1 million people joined WhatsApp daily making it one of the fastest growing companies in terms of user base in the world. Improved engagement and mobile advertising are also key benefits Facebook intended to derive from the acquisition. (Litza, 2014)