“Zuckerberg explains Facebook’s secrets for acquiring companies.”
SUMMARY OF THE DECISION
Facebook has spent a total of $19 Billion on buying the US-Based messaging app for WhatsApp. The company acquired WhatsApp with its $300 Million revenues and its 55 employees for this huge amount. This astonishing figure is second only to the acquisition made by HP of the company Compaq who was the market leader and had substantial profits and revenues. The amount of $19 Billion is 13 times more than the Facebook net income of 2013. It is also 2.5 times more than the 2013 gross revenue of 2013. This strategic decision of Facebook to purchase WhatsApp for such huge amount is not much appraised when established and successful companies have been acquired at much lower prices than this. The decision was made in 2014 which marks four years from now. The results of this acquisition pretty much analyzed and materialized to Facebook in the last four years.
The outcome of the Decision:
In this fast-paced world of technology, irrelevancy can haunt a company who is currently a market leader to go for unusual steps. Companies like Motorola and HP lost their relevancy in months and are found to be struggling since then. With this height of the fear of irrelevancy, companies tend to stay ahead of the market. The outcome of the decision on the acquisition of WhatsApp for such huge amount is reflective in the market access and the prospects of Facebook aided by WhatsApp. The access to more than 5 billion Smartphone users by 2019 is one of these reasons. The market access of WhatsApp brings the strengthening position in emerging markets where future growth is most expected (Heath). The deal also aided in getting equal leverage against its competitors like Line, WeChat, and KakaoTalk. The deal also aligns with the mobile strategy of individual mobile brands. It also helped Facebook in diversifying its revenues and its Facebook group. It shows that even though looking expensive, WhatsApp was a big catch for Facebook (Donald).
KEY CONCEPTS RELATED TO ARTICLE
Strategic decision making is all about charting out a course of direction for long-term goals and vision. The clarification of the big picture for the company is essential to provide focus to the employees, management, and stakeholders in the direction of the company. The Facebook decision to buy WhatsApp aligns with this concept. Facebook needs to have access to the emerging markets as most of the growth is expected in this market. Other than this, the smart phones are going to be the prime point of focus for Facebook along with other tech companies in the future. More importantly, the huge databank and access to smart phones are aligned with the long-term strategic goals of the company.
DECISION ANALYSIS
Staying relevant has become a matter of life and death for companies these days. It only takes one new idea to revolutionize the way people live and consume products. The frequent development of disruptive technologies has made the companies conscious enough to move ahead of their market. Those missing out on the market trends pay with the loss of their success, revenues, and market position. It is the reasons strategic decisions have gained more importance. The strategic decision of Facebook to acquire WhatsApp even when other competitors like Apple and Google were bidding higher quotes was certainly a good and timely decision. It not only strengthened the position of Facebook in the mobile market, and emerging market, it also safeguarded it from any potential future threat from its competitors if the deal had gone any other way.
Work Cited
Donald, Colin. “Six reasons why Zuckerberg’s $19bn for WhatsApp is a steal for Facebook.” The Guardian. The Guardian, 21 February 2014. Web. 27 July 2018. https://www.theguardian.com/media-network/media-network-blog/2014/feb/21/zuckerberg-facebook-whatsapp-mobile.
Heath, Alex. “Mark Zuckerberg explains Facebook’s secrets for acquiring companies.” Business Insider. Business Insider, 18 January 2017. Web. 27 July 2018. https://www.businessinsider.com/mark-zuckerberg-explains-facebooks-acquisition-strategy-2017-1.
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