The composition of Fortune’s “100 Best Companies to Work For” rating remains relatively unchanged over the years, but this year 16 new companies were good enough to be included into this rating. One of such companies, Twitter, a global platform for sharing ideas and information, managed to get as high as to 24th place ("100 Best Companies to Work For 2015").
This is clearly a success, especially when taking into account market conditions in which the company operates. The best way to analyze these market conditions is through Porter’s Five Forces framework, which considers such forces as rivalry among the competitors, the threat of substitute products, bargaining power of customers, bargaining power of suppliers and the threat of new entrants.
The first force is the rivalry among the competitors. The competition in the industry is quite fierce practically in every aspect of the company’s business. The number of competitors is also quite impressive since the company competes with any internet technology company that offers similar platforms or products that allow customers to express their ideas and share their information. The strongest competitors in this area are, of course, such giants as Facebook and Google. Additionally, the company faces competition from the developers of various mobile applications that allow to distribute content over the internet (Twitter, Inc).
The threat of substitute products or services is not very strong. As the main source of revenue for the company is advertising, the company competes with traditional advertising agencies as well as online businesses the marketers may use to reach their target audience (Twitter, Inc). Still, they are not likely to diminish the importance of social networks.
The next force analyzed is the threat of new entrants. The industry has quite low barriers to entry and new similar products and platforms appear all the time. The main government regulations faced by the company and its competitors are concerning privacy of their users and protection of their data, but new entrants can easily comply with these laws. Moreover, the company’s business is subject to constant technological change and product innovation, and it is possible that the competition will become even more fierce as Twitter and other companies invent new products or find a new use for the old ones.
Bargaining power of buyers is also very strong. Twitter has two types of customers: active users and third parties that advertise their products and services on Twitter. The number of active users is currently growing, but there are many examples of consumer-oriented websites that offered similar services and whose user bases eventually declined after the period of high popularity. The problem is that the switching costs for users are not very high, especially for influential ones (celebrities, government officials, journalists, world leaders). The only thing that would be lost if the user switches to other services is the tweets he made and his followers and that is not the issue for influential users.
The same is true for advertisers. Twitter generates nearly 90% of its revenue from the sale of its Promoted Products, but there are no long-term contractual obligations, and advertisers can easily switch to another service or platform (Twitter, Inc). Moreover, advertisers are in the position to press down prices for the Twitter ads or they even may choose to use free Twitter products and services to reach their audience.
Another force is the bargaining power of suppliers. The most important suppliers for Twitter are suppliers of labor. Therefore, hiring and retaining highly skilled personnel is key to the success of its business. The thing is that qualified workforce is crucial for any company in the information technology industry and there is a competition in the market for senior management, designers, engineers and computer programmers, and especially in the San Francisco Bay Area where the company is located (Twitter, Inc).
Moreover, as noted in the company’s Annual Report, after the initial public offering of the company, many of its employees that received stock can just start selling it in the market and that would significantly influence their incentives to work for the company (Twitter, Inc). Actually, the fact that Twitter was included into the Fortune’s “100 Best Companies to Work For” rating is also a sign of the great dependence on the workforce. The company obviously tries to create the best working conditions for its personnel.
Still, in order to gain an understanding of the Twitter prospects, it is also necessary to perform SWOT analysis.
The main company’s strengths are wide customer base and good brand image. Moreover, over the years, Twitter attracted many influential users whose tweets increase the popularity of the service itself. Twitter was created as a service that allows to make concise and speedy updates, and that is appreciated by many users. In addition, one of its strengths is asymmetric follow model where one user can be followed by thousands of other users without the need to follow them in return (Twitter, Inc). This feature allows to increase the audience dramatically. Twitter also has good integration with other platforms, especially through its mobile applications.
Nevertheless, there are also many weaknesses. The key weakness is that its business model is limited and it is hard to expand its scope. The expansion is crucial now when the growth of its user base is slowing down. One of the reasons why people visit Twitter but do not sign in (and there are more than 500 million of such visitors each month (James, “Instagram, Twitter, Snapchat, Facebook”)) is the 140-character limit on the tweets. Not everyone can express their thoughts in such concise manner. Until recently, the limit applied even to direct messaging, and Twitter was no competition to messaging apps.
The key opportunities for the business include attracting more celebrities and other influential users that would make Twitter more popular, extending the 140-character limit and making the service closed or partly closed to the unregistered visitors.
At the same time, the company faces a lot of threats. One of them is the possible loss or disruption in the interoperation of Twitter with other operating systems and networks. For instance, Twitter lost nearly 3 million users when Apple’s Safari had an integration bug (James, “Twitter Beats 3Q15 Estimates”). The company also heavily relies on search engines and application marketplaces (Twitter, Inc). In addition, there can be harmful effects if the system will not be able to prevent spam effectively or protect privacy and security of the service’s users against hackers. The company also may be adversely affected by the negative publicity.
Works Cited
"100 Best Companies to Work For 2015". Fortune. 2015. Web.
James, Matilda. "Instagram, Twitter, Snapchat, Facebook: Social Media in Flux". Market Realist. 1 Oct. 2015. Web.
James, Matilda. "Twitter Beats 3Q15 Estimates: Stock Falls Post Earnings Release". Market Realist. 29 Oct. 2015. Web.
Twitter, Inc. 2014 Annual Report 10-K. 2015. Web.
