Discuss about the Understand Various Benefits Of Using Social Networks In Business.
Over the past few years, the growth in the number of internet users has increased with the popularity of smartphones, and it has resulted in increasing the number of social media users. Trainor et al. (2014) provided that the growing number of social media users creates new business opportunities for enterprises because they can reach millions of people directly. While using social media sites, companies receive a number of advantages which provides them a competitive advantage such as effective communication channel, marketing tool, collection of market data, recruitment of employees and business expansion. However, there are a number of risks associated with social networks which result in increasing challenges for organisations such as the threat of cyber-attacks, cyberbullying, insider threat, and requirement of clear strategy (Stelzner, 2014). This report will evaluate the case of ‘Starbucks Corporation’ to understand the role of social networks in modern organisations. This report will analyse advantages and disadvantages of using social networks in business by evaluating the example of Starbucks. Examples of various other organisations which are affected by social media sites will be analysed in the report as well.
Firstly, this report aims to understand various benefits of using social networks in business by evaluating the example of Starbucks Corporation. Further, this report will evaluate various drawbacks relating the use of social networks. Examples of different companies along with Starbucks will be given in the report in order to understand each of these factors. The goal of this report is to analyse different studies on the topic to understand how advantages and disadvantages of social networks affect businesses.
This report will understand the advantages and disadvantages of social networks in business by examining the social network strategies of Starbucks Corporation. This report will focus on secondary research on this topic to understand its importance in modern enterprises. Further, this report will include examples of various other companies that are affected by the use of social network strategy in business.
Social networks are referred to internet-based social media programs through which individuals can interact, share and communicate with others by using an internet connection. As per Stieglitz et al. (2014), in the past two decades, the number of social media users has increased substantially with the popularity of smartphones and online based services. Currently, there are over 4 billion internet users from which more than 3.196 billion are active social media users (Shayon, 2018). Moreover, there are over 2.9 billion people who actively use social media through their smartphones (Figure 1). The social media sector is dominated by Facebook with over 2.167 billion active users (Shayon, 2018) (figure 2). There are many other popular social media sites which are used by millions of users such as Instagram, YouTube and Twitter. Castells (2015) provided that in terms of revenue generation, social media sites are giving competition to traditional forms of marketing and business research tools. For example, in 2017, the social media advertising revenue was more than US$41 billion, and the profits have substantially as it was US$32.91 billion in 2016 (Statista, 2018a) (Figure 3). On the other hand, television advertising revenue in the United States for 2016 were US$70.6 billion, however, they are expected to grow only US$75.2 billion by 2021 because corporations are adopting social media marketing (Statista, 2018b) (Figure 4).
These statistics show how massive social sites have become, and they offer a potential market to organisations for performing various business practices such as promotion, selling, market research, advertisement and collection of feedback. Paniagua and Sapena (2014) provided that the numbers of corporations that use social media sites to perform business activities are increasing because they understand the value of effective use of social media in business. However, many organisations are avoiding using social media sites because of various risks associated with them. But, despite many limitations, the number of corporations adopting a social media strategy is increasing rapidly. Jussila, Karkkainen and Aramo-Immonen (2014) provided that enterprises use social media marketing because they can customise their advertisements based on the preference of their users by collecting their data however this option is not available in any other form of marketing such as television and billboard. Effective use of social media platform generates a competitive advantage for companies which improve their market reputation and overall profitability. Many corporations have generated a competitive advantage in the industry by effectively using social media for interaction and promotion to customers; Starbucks is a good example.
Starbucks Corporation was founded in 1971, and its headquarters is situated in Seattle, Washington, United States. It is an American coffee company, and it operates in more than 27,339 locations in more than 62 countries (Stoffel, 2018). The company use social media platforms for more than just a business tool. It uses social media sites to connect with its customers and share relevant content with them which result in increasing its fan following on social media sites. The corporation has generated a massive fan following on social media sites. Collectively, it has over 65 million social media followers in three of the major social media sites which include Facebook (37 million), Twitter (12 million) and Instagram (16 million). Kohli, Suri and Kapoor (2015) stated that the company focuses on communicating and interacting with its customers through social media sites rather than promoting their products which result in increasing their loyal fan base. Mainly, the corporation uses social networks due to their numerous advantages which result in increasing their effectiveness.
The primary advantage of social networks is that they provide an effective channel of communication to corporations through which they can communicate with their customers, employees and other organisations. Ashley and Tuten (2015) argued that it has become substantially easier for organisations to communicate with their customers by using different social media platforms such as Facebook, Twitter, and Instagram. They can directly send a message to their customers to tell them about their new offer or any other news which might effective them. Furthermore, social networks provide two side communication channels to organisations which mean customers can also easily share their opinions with the company. Moreover, corporations use social networks to communicate at the workplace by using platforms such as Google Hangouts and Skype. Swani et al. (2017) stated that by using social media sites, corporations can share information or details with employees or customers in other countries without any hiccups or lags. In case of Starbucks, the enterprise uses its social media presence to communicate with its customers and share relevant content with them. The company shares content of its fans and communicate with them directly so that they feel attached to the organisation. Furthermore, the company shares relevant offers and deals with its customers rather than showing unnecessary advertisement which annoys them. Lam, Yeung and Cheng (2016) provided that the company also encourage its employees to communicate through social media with each other during work because it is more efficient and reliable way of communication. It has also established in social media interaction team that focuses on creating a positive relationship with employees and customers by using social networks (Starbucks, 2014).
Starbucks understands the significance of social media as a communication tool, and it effectively uses it for creating a strong relationship with its customers and employees which increase its loyal fan following and brand image. Felix, Rauschnabel and Hinsch (2017) stated that other than a communication tool, social networks can be used as an effective marketing tool by the enterprise. One of the primary reasons for the success of social media sites is that they are free to use by everyone and anyone can create their account on social networks. According to Bennett (2014), nine in every ten organisations operating in the United States use social media sites. The companies can easily create their account on social media sites and their fan following starting following them. People aged 18-34 are more likely to follow the brand on social media sites, and they are more likely to recommend them to others if they had a good social media service experience (Hainla, 2018). Similarly, Starbucks has created an account on almost each social media platform so that it can connect with its fan base. The followers of the enterprise include diehard fans that follow and are genuinely interested in the products of the enterprise. As per Hudson et al. (2016), the company can simply share a post about their new product or offer on each of their social media accounts, and it automatically reaches to its targeted audience. Furthermore, social media sites collect personal data of its users to learn about preferences and likes which enables them to show customised advertisements to them which are based on their preferences.
Starbucks use social media advertisements to target people who like coffee and interested in its other related products. Wu (2017) provided that the enterprise focuses on creating positive relationships with fans online rather than continuously showing them advertisements which can be annoying. As discussed above, social media sites collect personal data of users which contains information regarding their preferences and personal likes and dislikes. Lamberton and Stephen (2016) state that these market insights are crucial for the success of corporations since they can use this data to create business strategies that are targeted towards customers based on their preferences. Furthermore, social media sites connect millions of customers directly to a company, and they can use this platform conduct market research by collecting data from their followers. Many social media sites enable enterprises to conduct a poll on their account in which anyone can participate and easily share their feedback. Cardon and Marshall (2015) provided that before developing new products, corporations can conduct a poll to learn about the preferences of their customers and create products that fulfil their demands. Furthermore, social media sites provide two-way communication channels between enterprises and customers that mean followers can share their feedback and opinions regarding a firm’s products or services directly through their social media account. Similarly, Starbucks Corporation uses social media sites to collect market insights about their products which are difficult and expensive to collect otherwise.
Many organisations also use social media sites to hire employees because they can connect which people across the globe, and they can communicate with potential candidates from all across the globe. Pfeffer, Zorbach and Carley (2014) provided that they can post advertisements regarding job opening and required qualification on their social media accounts and potential candidates can easily apply for the job. The human resource department can interview candidates that applied from abroad by using social networks which assist enterprises in hiring talented employees from across the world. The use of social networks in business provides a number of advantages to corporations, however, there are many disadvantages of using social media sites as well which negatively affects the growth of an enterprise. As per Lau, Xia and Ye (2014), the main issue associated with social media sites is the vulnerability of cyber-attacks. Social media sites connect users through the internet connection and cybercriminals can disrupt such connection to hack into people and organisations social media accounts. Cybercriminals target the social media accounts of large organisations to collect their confidential data and gain an unfair advantage. Along with the popularity of social networks, the risk of cyber-attacks has increased as well.
Many corporations have suffered substantial financial losses because cybercriminals hacked into their social media accounts. For example, HBO’s social media accounts were hacked by cybercriminals that resulted in the leak of the script of their popular TV series “Game of Thrones” (Kharpal, 2017). Similarly, social media accounts of people and celebrity can also get hacked, for instance, social media account of Mark Zuckerberg, Founder, Chairman and CEO of Facebook, were hacked more than three times in 2016 (Mathews, 2016). Crawford and Gillespie (2016) stated that although social media sites are finding new ways to stop hackers by increasing their website security, however, cybercriminals are finding new ways to hack the accounts of people and organisations. The mobile application of Starbucks was hacked in which private data of customers were leaked and hacked conducted fraud to gain an unfair advantage (Morris, 2017). Therefore, cybersecurity is one of the primary issues relating to the use of social media sites in organisations and people.
Another disadvantage of the use of social media sites is that it provides an open platform to everyone in the world, and they can share their opinions both positive and negative on the social media sites which lead to cyberbullying. As per Gregoire, Salle and Tripp (2015), there are a number of instances in which corporations people started posting negative comments regarding a company’s products or services which resulted in reducing their market reputation. People who did not like products or services of a company can easily create fake accounts and share negative feedback regarding the organisations which affects its profitability. Many people criticise and post negative comments on social media accounts of Starbucks which negatively affects its brand image. Furthermore, the actions or steps taken by organisations on social media sites are available for everyone across the globe, and any mistake can reduce brand image and profitability of a company. Cheung, Lee and Chan (2015) provided that many times, employees made a mistake while sharing content on social media sites which can affect the profitability of an enterprise. Studies have shown that insider threat is the primary reason (in more than 60 percent cases) based on which cybercriminals are able to hack into the accounts of organisations (Figure 5). Any mistake or carelessness of an employee could cause huge financial loss of an enterprise because cybercriminals could collect and leak confidential data of an organisation.
While using social networks, organisations are required to develop a straightforward strategy in order to avoid confusion and effectively use social media strategy. Gaspar et al. (2016) provided that the lack of clear strategy can increase challenges of companies while using social media sites. Companies can use social media sites in many different ways and in order to avoid confusion they should create a clear strategy. For example, Starbucks has established a clear social media strategy based on which they focus on creating a positive relationship with customers and creating a solid fan following rather than promoting their products. On the other hand, if corporations are only using their social networks to advertise their products to customers than it can negatively affect their profitability. According to Langenfeld et al. (2014), any mistakes on social media sites did not go unnoticed, and they can reduce the profitability of an organisation. For example, an advertisement of PepsiCo in which it was shown that people could stop police violence and protests by sharing a soft drink. The company had to take down the advertisement, and it resulted in causing substantial financial loss to the firm (Malone and Baysinger, 2017) People use social media platforms to criticise the company’s actions, and they started boycotting its products which reduce its profitability. Therefore, it is necessary that corporations develop a clear strategy while using social media account to avoid any negative feedback.
Conclusion
In conclusion, the importance and use of social media sites have grown substantially among modern enterprises, and they use it for performing various business practices such as collection of data, marketing, market research, others. Starbucks has successfully implemented an effective social media strategy based on which the corporation interact and communicate with its customers to increase its fan base. Based on effective use of social media sites, Starbucks has generated a competitive advantage in the industry which assists in increasing its profitability. While using social networks, corporations receive a number of advantages such as effective marketing tool, market insight, communication channel, global reach and others. Along with benefits, there are many disadvantages of the use of social media sites such as vulnerability to cyber-attacks, insider threat, negative publicity, and requirement of a clear strategy. However, the use of social media sites in the organisation will continue to grow despite its challenges. Therefore, corporations should develop strategies which address issues relating to social media sites and increase their effectiveness. Starbucks has implemented an effective social media strategy which generates a competitive advantage of the firm and increases its profitability. Similarly, corporations should take precautionary steps for improving cybersecurity and reducing insider threats. The companies should also develop a clear strategy which will assist them in effectively using social media sites which result in increasing their profitability and sustaining their future growth.
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