Facebook Inc. Report

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STRATEGIC FINANCIAL MANAGEMENT

Facebook Inc. Report

Facebook was founded in February 2004 by Mark Zuckerberg, Dustin Moskovitz, Eduardo Saverin and Chris Hughes as a college networking website while they were University Students. On 4th October 2012 Mark Zuckerberg (CEO-Chairman) announced that Facebook have reached 1 Billion users worldwide, which makes it the largest social network on the planet. On May 2012 Facebook was listed on the NASDAQ stock exchange raising $16 billion.

Giuseppe Roberto

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Contents
1. INTRODUCTION…………………………………………………………………. 4 1. Financial Analysis…………………………………………………………………. 5 2. Investor Related……………………………………………………………………. 7 3. Human Resources Management Analysis…………………………………………. 8 4. Marketing Analysis………………………………………………………………… 10 5. Operations Analysis……………………………………………………………...… 12 6. Prioritised Strengths………………………………………………………………... 15 7. Prioritised Weaknesses…………………………………………………………….. 15 8. P.E.S.T.E.L. Analysis……………………………………………………………… 16 9. Porter’s Five Forces Analysis……………………………………………………… 18 10. Market and Segment Size………………………………………………………….. 20 11. Critical Success Factors prioritised………………………………………………… 21 12. Opportunities and Threats prioritised……………………………………………… 22 13. Current Strategy……………………………………………………………………. 23 14. Future Strategies…………………………………………………………………… 24 15. Selection of the Winning Strategy…………………………………………………. 25 16. Winning Strategy Description and Risk Assessment……………………………….26 LIST OF REFERENCES………………………………………………………………. 27 APPENDICES…………………………………………………………………………. 29

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INTRODUCTION

The objective of this report is to analyse whether Facebook Inc. have a business model that can support its operations in the foreseeable future and recommend future strategic business unit level (SBU) or corporate strategy level. Internal and external analysis will be performed to analyse the strategies that have been adopted by Facebook based on Facebook Inc. Form 424B4, Form 10-Q3 2012 Report and Facebook Inc. case study. The reporting currency is US$. Facebook was founded in February 2004 by Mark Zuckerberg, Dustin Moskovitz, Eduardo Saverin and Chris Hughes as a college networking website while they were University Students. On 4th October 2012 Mark Zuckerberg (CEO-Chairman) announced that Facebook have reached 1 Billion users worldwide, which makes it the largest social network on the planet. On May 2012 Facebook was listed on the NASDAQ stock exchange raising $16 billion. The share price for the IPO was $38 and Facebook was valued $104 billion, the largest value in the history for a new listed company. Facebook generates revenue from Advertising and Payments and Fees.

Facebook operates two SBUs across four main geographical locations:

SBU

Geographical Locations

Advertising

US & Canada

Payments and Fees

Europe

Asia

Rest of World

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1. Financial analysis1

Profitability, Liquidity, Efficiency  Revenue in Q3 2012 was $1,262m vs $954m Q3 2011. Revenue is generated by two activities, Advertising and Payments and Fees. Analysts on average estimated revenue of $6.41 billion for 2013 and $8.12 billion for 20142     Advertising accounts for 86% of revenue while Payments 14% for the nine months to 30th September 2012 US & Canada represent 50.5% of total Revenue, Europe 27%, Asia 12.2% and Rest of the World 10.3% Net sales have grown from $467 in Q3 2010 to $1,262 in Q3 2012, 270% growth. This astonishing increase is due to the exponential increase users3 GP% and OP% have decreased from 76% and 47% as Sep 30 2011 to 72% and 0 as Sep 30 2012 as Cost of Revenue increased by 58% while Revenue increased only by 36%. Furthermore, Total Cost and Expense increased by 232% because of the $1.388Bn Share-Based Compensation + Payroll Tax related to Share-Based Compensation during Q2 2012      During the same period Net Profit decreased from $698m to ($11m) ROCE increased from 0.10% in 2009 to 39.68% in 2010 and 32.33% in 2011. Facebook held...
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