Strategy Finalization and Implementation
Maturation of the social networking industry
The social networking industry is headed to it maturity stage and will certainly bring challenges to companies providing social networking services. Mature industries are characterized by saturated demand which is ether declining or slow-growing, there is excess completion and competitors are too willing to extend large discounts to the customers, profit margins are eroded and the return are minimal, company emphasize cost cutting strategies to reduce the effects or eroded profit margins and increased consolidation of competitors (Bryson & Alston, 2010). In social networking industry, there will be a reduction in super growth of users and the cost or operation is likely to increase. Maturation of social networking sites will reduce the ability of sustaining a competitive advantage and shift opportunities of leadership from differentiation based factors toward cast-based factors. The three things that are likely to minimize opportunities for competitive advantage are: first, increase in user knowledge, product standardization and reduced product innovation, which limit differentiation. Second, diffusion of technology, which erode the advantage of superior technology the sites may enjoy during their emerging and development sages. When a cost advantage is realized it will becomes extremely vulnerable to exchange rates and new completion from emerging low cost competitors. Third, developed of internet infrastructures and skill will make it possible for key player for face attacks from firms which can easily focus on small niches. In this regard, mature companies will increasing face reducing profits and may have to change their strategies. Mature markets are also characterized be over investments, internationalization and a stiff price competition. Social network companies will experience these challenges and will fight it extremely difficult to sustain the price competition.
How web sites/companies are adjusting to the maturation of the social networking industry
The challenge of maturity is already being experience in the social network industry. Under the difficult conditions brought about by maturity, there is no silver bullet solution that can keep a company going other than strategy. There is no specific success formula, but creation of an effective strategy may keep the company going. The formulation of such strategies must take into account the fact that customers in a mature industry are more demanding than customer in emerging and developing markets. Strategies must be holistic since simplistic strategies fail. Company employ different strategies among them cost leadership, global strategies, differentiations strategies, focus strategy e.t.c with an aim of gaining a competitive advantage over competitors, own a large chunk of the market and keep making profits. Mare markets tend to reduce opportunities for competitive advantage and differentiations and increase the need for cast-base approaches. It takes a lot of efforts to remain financially stable.
To remain competitive, companies and website have to respond to maturation of the social network industries and the challenges associated with the maturation as well as exploiting the opportunities. The companies have devised various strategies that are meant to ensure that they remain productive.
Current trends of strategic management in the social networking industryAt the moment, social network is a booming industry. Most players in the industry are expanding their networks trying to get new customers and users. Social networking has become part of the corporate arena, sports, education among other. There is nothing the entrepreneurs and investors will not try as they compete against each other.
The first notable trend that has been brought about by maturation is the need for more capital to expand services and thus gain access to a larger market. The need for additional capital is common in mature industries since company seek to improve their operation and benefit from a cost-oriented strategy. Facebook, one of the most prominent social network site recently got went public at the new York stock exchange in order to raise more capital fore is operational function and expansion of its services. This is typical of industries in mature markets since mature industries require high capital investment.
Innovation is also very common in social networks. The entrepreneurs in the industry consistently create games, and other applications for their users and customers. For instance, there are thousands of applications and game that users of face book are provided. They can enjoy these freely. At the moment, most social networks have application that allow users to share picture, post their status, comment on the picture and status of their friend as well as have real time chat with their friends. All these are meant to attract more users and fight competition for other social networking site. For instance, Google recent launched Google Plus, which is a social layer to its services. Google plus is part a social network and also a social search. This innovation has left industry observer and critics guessing whether Facebook and other prominent site will come up with something more innovative to give Google a run for their money.
Another notable trend is the adoption of the focus strategy. Social networks are employing focused strategies to gain ability to offer location-based services. For instance, despite being global, Facebook has been able to offer users location base services and has acquired Gowalla a location base network to improve its ability to perfectly provide location base services to its users.
Social networks are also working at developing a cult of influence. This is an influence similar to what Google did by creating a system that would reward anyone who developed content that could be easily found. Social networks are in a race to create a system that would see those who weld a lot of influence on social networks rewarded. A notable example is that of Klout, a player that has emerged with enormous determination to make their platform the powerhouse of digital dominance. This move by Klout underscores the general trend in the social network.
Gamification notion are also emerging. This gamification has nothing to do with gamer but rather, it involves creation of downloadable applications that can be installed on phone or there portable devices and can help the users access their social networks more easily and convenient on the phones than it would be when using a phone browser. This application gives level rating to the users according to how they use them. This includes rewards for participation, badges, and points among others. This has made the use of the site an enjoyable game.
The impact of maturation of the social networking industry worldwide our business strategy in the future
The maturation of the industry will have several impacts on ours strategy. Our focus and differentiation strategy will certainly face various impacts from the outcome of the maturation of the market. Although differentiation is still a good strategy for handling the challenges of a mature market, the scope of differentiation advantage is greatly reduced. Increased consumer awareness and standardization of products characterized by reduced innovation may negatively affect or differentiation strategy. In such a condition, cost-based advantages are more profitable the differentiation base advantages. A focus strategy is however still viable in a mature market. Despite the market being mature and innovation avenues being limited, a focus strategy can still yield appropriate results be targeting underserved niches. Another advantage is that the focus strategy can ensure that the company retains it initial market as it expands due to customer royalty created during the emerging stages of the industry using differentiation. Despite the diminishing opportunities for differentiation, a differentiation approach can still maintain a sense of uniqueness. The focus strategy can still serve to help the farm penetrate new markets that are still underserved.
New strategic plan/approach in regards to the maturation of the industry
In the mature market, we will continue to employ the focus with differentiation strategy (Strategy Composition, n.d.). Although the differentiation advantage will be reduced, the will still be available base on innovation and provision of superior quality above the standardized quality service that the most of the players will be offering. Focus strategy is also still viable for business and should be improved to meet the challenges of a mature market. Focus strategy can be used to penetrate attractive market that will not have been exploited yet in the mature industry. The business will identify new market that have not yet be exploited and focus on serving those that are attractive. The focus group may be geographical, professional, demographic, hobby and fund groups, or academic or corporate groups. The target selection must be base on the level of penetration of social networks to avoid direct completion with established networks in their niches. Once an attractive but underexploited market is identified, the company should move in with a differentiation strategy targeting the need of the group through differentiation of both products and service. The differentiation will aim to create unique product for the identified markets to ensure that the company exerts dominance over the other social networks.
Effects of maintaining focus with differentiation strategy
In mature market, this strategy will have several effects on the businesses competitive advantage, cost advantage and differentiation advantage. The focus and differentiation will accord the company a competitive advantage over the competitors due to domination in the niche market. Focused strategy ensures that the firm focuses only on niche where it can win the completion. Once in the market, the differentiation process will make the brand strong and give it a competitive advantage over other firms. Cost advantage will be minimal due to cost trade-off brought about by the process of differentiation. However, the firm will ensure that cost advantages are not lost by finding and developing cost effective approaches to differentiation, which minimize the cost of providing social network products and service but does not compromise the quality. With differentiation as part of the strategy, the company will continue to experience differentiation advantages especial due to its focus values. Being focused mean the products and service will be directed at specific markets. The differentiation will ensure that the product suite the market thus making the customers or use identify with the brand. The differentiation must achieve customer royalty to beat the competition in the niche markets.
Strategy Composition (n.d.).
Bryson, J. M., & Alston, F. K. (2010). Creating and Implementing Your Strategic Plan: A Workbook for Public and Nonprofit Organizations. John Wiley & Sons.
Cassia, et al. (2006). Entrepreneurial Strategy: Emerging Businesses in Declining Industries. North Hampton, MA : Edward Elga.