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Boran Chen

on 22 April 2014

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Transcript of LinkedIn

Market Figures
Key Figures
Three Approches
The long-term viability of its ‘Walled Garden Strategy’
Emergence of standards
User ease of access to and transfer of data between LinkedIn and other platforms
Key issues
Tipping Point
LinkedIn: late introduction/early growth phase
LinkedIn market life cycle
Business Strategy Analysis
Major Networking Social site population
Between 1997 and 2006 the number of networking sites increased from 1 to 32
17.7 million users a month (MySpace, Facebook & LinkedIn combined)
Social/Professional Network Industry Life Cycle
occurs in industries that are subject to network Externalities – the more users the greater the value to users
Walled garden approach
To remain attractive to customers in an increasingly connected environment it must ensure compatibility with the wider network and facilitate ease of interoperability
One way to achieve this is by participating actively in the construction of industry standards
This imperative creates a dilemma for LinkedIn:

Compatibility and Interoperability
LinkedIn was founded in
Dec. 2002
with the stated aim of ‘making every professional better at what he or she does, every day’
By 2008 it had established itself as the world’s largest Professional Networking Site (PNS) with
over 23 million
members in
150 countries
, including senior executives from all of the

500 listed companies
Despite monthly growth of
1.2 million
new users and 2008 revenues forecast to reach
Linked to Gamma Power
The sustainability of a network service dedicated solely to professional-related

Increasing business growth
how far to exploit growth in ‘primary research’
how to grow internationally, particularly in areas wit

Lots of differentiation and no consensus over what
customers want
• no dominant standard
• SNS/PNS distinction
Emergence of dominant standards and consensus
• widespread adoption of Google’s Open Social development platform
• the founding of the inter-company Data Portability Work Group, which LinkedIn joined in 2008
Growth Phase
Introduction phase
The emergence of standards presents a major challenge for LinkedIn
Network Externalities
Web-based Social/Professional networks are an example
LinkedIn is successfully positioning itself as the standard in
Professional Networking
The number and quality of its members, including Fortune 500
Executives, will soon create a ‘tipping point’ where
professionals will have to join if they want to be connected
However, LinkedIn is also a part of the wider web based services
By adopting Google Open Social it opened up its site to third party developers
By joining the Data Portability Work Group it has
engaged at an early stage
with the development of wider standards
To survive a ‘standards war’ early engagement is key (Shapiro & Varian, 1999)


It still maintains relatively tight controls over its platform
LinkedIn Market Segmentation (Figures)
LinkedIn Market Figures
Market Differentiation
LinkedIn Business Value Chain
Competitor Analysis (SNS)
Competitor Analysis (PNS)
Linked Resource and Capabilities

Capital Investment
Split office base
Engineering Staff
Adoption of market standards
PNS Leader
Corporate Connection
Resource data base
This mix of resources and capabilities gives LinkedIn a distinct competitive edge in the market.
Other resources
Rapid growth and user expansion on 1.2million per month

Ambitious management team driving the company into the future

Largest college graduate base
Linked Revenue Source
LinkedIn’s four revenue source

 Primary research
 Collection information
 Gathering of industry experts
 Solution based forums driving decision making
Growth Potential
Primary Research
Competitive Advantage in an international Context
Internationalisation has a great impact on competition and the market changes very rapidly
In 1990, Ericsson, Siemens were world leaders in wireless handsets but by 2012, Nokia, Apple and Samsung dominated the market

LinkedIn has to maintain its competitive advantage in order to be a continuous leader in PNS market.

Along with its resources and capabilities Linkedin also needs to adapt to local market where they want to grow

International competitors
LinkedIn provides a wider range of products in a broader geographical scope.
In the future, Linkedin needs to further globalise its strategy in order to stay ahead of its competitors.
International expansion
Internationalisation is both a threat and opportunity
• Internationalisation may involve replication (McKinsey and Co.), acquisition(HSBC) or franchising (McDonalds)
• LinkedIn is in front of its rivals as it is giving new administrations, arriving at additional clients globally and making a greater expert system than the rest
Consistency between strategy and national conditions
Competitive advantage
in global industries requires congruence between business strategy and the pattern of the country’s comparative advantage.
In order to gain market share in those countries where LinkedIn is not doing well they have to achieve congruence between their firm’s strategy and national conditions by embodiment of national culture within strategy and management systems of that country
Global Integration VS National Differentiation
Vertical Segmentation
It has been found that LinkedIn was not able to capture
any market in Japan and China due to cultural
• LinkedIn should follow vertical segmentation and treat
those areas with special attention and changed market
Scenario Analysis
• In general, LinkedIn seems to be basing its strategy on the actuality of a
single scenario – the continued distinction between PNS and SNS.

• In an environment as volatile and fast changing as web-based services, it is better to employ Scenario Analysis (Bradfield et al., 2005) approach.

• By engaging in the process of constructing and analysing a number of
different scenarios LinkedIn can formulate a strategy more robust in its
ability to withstand different potential industry developments
Expand Market Segmentation
Work with third-party companies
Conducting online Meetings/ Interviews
Enhance the comparative advantage on job seeking (Resource / Capabilities)
Working with SNS on corporate professional page

Few of the methods could be, promote the PNS as a social networking website for companies and have tie-ups with MNCs so that their employees use LinkedIn in order to connect with other employees from the organisation.
Open the Walled Garden
It should continue to open up it's 'Walled Garden' so that the emergence of standardisation does not leave it behind
Use complementary services to maintain it's position as the dominant PNS

Industry life cycle and emergence of standardisation
Market Segmentation and Competitor analysis
LinkedIn International expansion
Internal Revenue Stream and potential for growth
CEO Dan Nye classified the standardization challenge as not
urgent, stating ‘[standardization] isn’t going to happen anytime soon.’

• Making predictions about tech industries is very risky:

LinkedIn's Current Strategy: " A Middle path"
Also in ‘Internet Time’ (Yoffie & Cusumano, 1998) Industry Life Cycle’s play out at an accelerated rate
Nye is adopting a ‘wait and see’ strategy, but when industry standards are likely to emerge, it’s best to be a leader rather than a follower

This is a vulnerability in LinkedIn’s strategy

In fast paced industries pushing innovation is less risky than remaining the same (Hamel, 2000)
LinkedIn's Current Strategy: " A Middle path"
Thus far its ‘walled garden approach’ has allowed
it to control and monetize user activity
Full transcript