Facebook in Russia Analysis

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Saint Petersburg State University
Graduate School of Management

CASE STUDY
Contemporary Strategic Analysis of Facebook in Russia

Subject: Contemporary Strategic Analysis
Authors: Group Seven of all kinds (Anne-Gaëlle Le Gal, Hildegunn Nesje, Andreja Ojsteršek, Nikolay Semakov, Roman Shapurko, Elena Shatalova (Zlochevskaya), Julia Shmeleva) Fall semester 2012
Mentor: Andrei Yu. Panibratov, Professor, Doctor in Economics, MBA

Table of Contents

Introduction3
Social Networks Overview5
The History of the Social Network Sites6
Facebook overview8
Part 1. Social Networks in Russia9
Part 2. Facebook in Russia13
Facebook’s Russian Story13
Porter’s 5 Forces Analysis17
The value chain and the value network - generic value configurations.21
PEST analysis25
SWOT analysis33
Part 3. Strategy suggestion for Facebook in Russia35
Conclusion41
Appendix 143
WORKS CITED44

Introduction

In this case study we will analyze Facebook in the Russian market with regards to contemporary strategic analysis. In the beginning we have set some goals that we want to reach as we work on the strategic questions of Facebook in Russia:

* Develop strategic opinions for business situation through analyzing Facebook in the Russian market; * Gain the ability to use the main techniques of strategic analysis and recognize their applicability and limitations with concern to Social Networks (Facebook); * Provide an informed answer to Facebook’s strategic questions in Russian market; * Improve our teamwork skills in making collective decisions in strategic analysis.

Our case study assumption is equal to Facebook’s goal in Russian market:

* Facebook will become number one Social Network web site in Russia.

Every analysis faces some limitations. Ours is connected to the fact that classical strategic analysis tools haven not been adapted to the structure of the Internet and Social Networks, but to “normal businesses”. This makes our analysis more difficult, but also more interesting and challenging.

We have divided the case study into several thematic parts. First part is the presentation of Social networks in general, containing definition and the development history. The second part examines the subject of our analysis, Facebook, within the context of the Russian Social Networks market. It also provides the chief market characteristics and an overview of the main competitors of Facebook in Russia. In our further analysis we have paid more attention to the VKontakte Social Network, because it is the Social Networking leader in Russia and therefore the biggest competitor of Facebook in Russia. These two companies not only compete for the same customer base, but also have, in some respects, increasingly similar business structures and sources of profit, especially due to the continual moves by both Facebook and Vkontakte to imitate some features of one another (e.g. Facebook borrowing the idea of network credits and Vkontakte copying the Facebook layout). For this reason, this study will often compare Facebook against the benchmark of Vkontakte as the most successful and popular social network in Russia. Although we could have taken into account another popular social network, Odnoklassniki, which currently holds the second position in Russia, for several reasons we do not think that is it a competitor that we can use to evaluate Facebook. First, it belongs to a different strategic segment, since its primary purpose is to reconnect former classmates. Facebook (and Vkontakte) in comparison are broader and do not focus on such a niche. It thus follows that the strategy of Odnoklassniki would not work for Facebook due to their different strategic visions, goals and market positioning. Also, because of its high proportion of paid services and its exclusive paid-for membership, Odnoklassniki is less competitive in the Russian environment due to the relatively low purchasing power...
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