The smart phone industry is growing by the day and we are at the threshold of unpacking it’s true worth by integrating it deeply with the social network. Our company, Facebook, has derived the opportunity to invest in the project that will enable us to incarcerate market share in the smart phone industry. The perseverance and hard work of our employees has made sure that we advance in this new venture. There are several alternatives that facilitate us to enter this market, which have been discussed in this report. To best estimate the possibility of our investment, the risk and profit factors have been estimated against a spectrum of parameters. These factors include manufacturing cost, revenues, market equity, marketing time, risk and profit evaluations. Some of the traditional industrial tools such as The NPV model and the Weighted Factor Scoring (WFS) Model have helped us with the strategic analysis. Using these tools, we were able to catalog the investments into the best fit, the most likely and the pessimistic cases. Eventually, based upon an in depth research and analysis, the most likely case was: collaborating with an OEM for joint development of the smart-phone.
Table of Contents
1. INTRODUCTION
2. WEIGHTED FACTOR SCORING
3. BEST CASE
4. MOST LIKELY CASE
5. PESSIMISTIC CASE
6. CONCLUSION & RECOMMENDATIONS
Objectives and Topics
The primary objective of this report is to evaluate the financial feasibility and strategic viability of Facebook entering the smartphone market by analyzing three distinct investment scenarios. The research aims to determine the optimal entry strategy by weighing risks, capital requirements, and potential market returns.
- Analysis of market entry strategies through the Weighted Factor Scoring (WFS) model.
- Evaluation of Best, Most Likely, and Pessimistic financial scenarios using Net Present Value (NPV).
- Assessment of operational risks including manufacturing, distribution, and brand equity.
- Strategic recommendations for hardware and software integration versus joint ventures.
Excerpt from the Book
BEST CASE
The best investment option for Facebook to enter into the Smartphone market would be to develop a device from its conceptualization to commercialization. This would include setting up units for the entire Smartphone value chain i.e. hardware and software manufacturing, marketing and setting up the distribution channels for sales. This is the best case because it offers maximum shareholder value weighed against the factors mentioned in the WFS. Let us first look at the advantages it offers:
• Highest return on investment- the entire profit share control stays with Facebook by being the sole investor and provides opportunity for lateral and longitudinal development of its product and services using the returns
• Direct competition to current Smartphone manufacturers- complete control of product architecture, R&D and addition of unique features to the device would rest with Facebook.
• Brand name enrichment- Facebook would be the exclusive benefiter of the added value from its product design i.e. there will be no brand dependency.
However, with this potential for increased value, there also exists a number of impending risks as discussed under.
• New realm - Since Facebook would be just starting out in the Smartphone market, it would be an entirely new trading arena where they have no prior experience, but awaits tough competition.
• Start up Investments- A new business would require a new staff, manufacturing facility, infrastructure and supply chain channels. Since, the learning curve for hardware production would be low; it would also require hiring external consultants, more R&D, thereby increasing the investments.
• Yearly Investments- The recurring maintenance costs are likely to be higher due to rapid and continuous up gradation of technology interface and operating costs.
• Domination-Establishing the device into the market would take more time due to the existing Smartphone market competition.
We regard this as the best fit after a synchronized analysis of the WFS model and the above mentioned advantages and disadvantages.
Summary of Chapters
1. INTRODUCTION: Outlines the strategic interest of Facebook in the smartphone industry and introduces the methodology used for market entry evaluation.
2. WEIGHTED FACTOR SCORING: Details the application of the WFS model to rank investment factors such as manufacturing costs, risks, and market equity.
3. BEST CASE: Explores the financial and strategic implications of Facebook independently developing the entire smartphone value chain.
4. MOST LIKELY CASE: Analyzes the potential for a joint venture with an established manufacturer to balance risks and resources.
5. PESSIMISTIC CASE: Discusses the strategy of brand labeling an existing smartphone and the associated risks to brand reputation.
6. CONCLUSION & RECOMMENDATIONS: Synthesizes the NPV and WFS findings to recommend the most viable path forward for the company.
Keywords
Facebook, Smartphone Market, Financial Analysis, NPV Model, Weighted Factor Scoring, Joint Venture, Brand Equity, Market Entry, Investment Strategy, Return on Investment, Manufacturing, Risk Management, Product Architecture, Capital Expenditure, Profitability
Frequently Asked Questions
What is the primary focus of this analysis?
The analysis focuses on determining the financial feasibility and strategic risks associated with Facebook entering the smartphone hardware market.
Which methodologies were applied in the report?
The report utilizes the Weighted Factor Scoring (WFS) model to weigh strategic parameters and the Net Present Value (NPV) model to forecast financial returns over a five-year period.
What are the three scenarios evaluated?
The scenarios include a "Best Case" (full independent development), a "Most Likely Case" (joint venture with an established manufacturer), and a "Pessimistic Case" (simple brand labeling of an existing device).
What is the ultimate goal of the research?
The goal is to provide a data-driven recommendation on whether Facebook should invest in its own R&D and manufacturing or pursue collaborative partnerships.
What topics are covered in the main body?
The main body covers the advantages and disadvantages of each investment scenario, including manufacturing costs, time-to-market, risk factors, and potential for brand enrichment.
How is the report characterized by its keywords?
The report is characterized by financial and strategic terms such as Investment Strategy, NPV, Risk Management, and Brand Equity.
Why is the "Best Case" scenario considered the top choice by the author?
Despite the high initial investment, the author identifies the "Best Case" as the most beneficial due to maximum control over product architecture, R&D, and long-term shareholder value.
What are the identified risks of a joint venture?
The report highlights risks such as unclear objectives between partners, imbalances in expertise or assets, potential culture clashes, and the loss of long-term market control.
How long is the projected break-even point for the recommended strategy?
The report estimates that the "Best Case" scenario would achieve a break-even point within approximately 1.96 years.
What does the "Pessimistic Case" imply for Facebook’s brand?
The pessimistic case implies a high risk of brand injury, as relying on existing products from other companies may lead to a loss of the reputation as an innovator.
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- Rohan Handa (Autor:in), 2011, Facebook Smartphones - A Financial Analysis, München, GRIN Verlag, https://www.hausarbeiten.de/document/182278
