Bachelor Thesis

BACHELOR THESIS

Utilization of social media in an organizational context A qualitative study

Michael Bork Nicolas Behn

Bachelor of Science in Business and Economics Business Administration

Luleå University of Technology Department of Business Administration, Technology and Social Sciences

LULEÅ UNIVERSITY OF TECHNOLOGY ÅUGSBURG UNIVERSITY OF ÅPPLIED SCIENCES

Utilization of social media in an organizational context

A qualitative study

12/05/24

Department of Business Administration and Social Sciences Division of Industrial Marketing and e-Commerce

Supervisor: Anne Engström

ABSTRACT

Since the Internet penetration rate is nearly at one third of the world’s population and social networks experience an ongoing exponential growth, becoming a part of our everyday life, companies feel forced to join this trend. Concerning this development, a lot of scientific articles and studies were published about how organizations can also benefit from this growth. The main focus of this research was mainly based on the marketing aspect and social networks, neglecting the other possible application fields and especially disregarding the remaining types of social media. Therefore, the purpose of this study has been to investigate how social media can have an influence on companies' activities in regard to their value chain, according to the theory by Michael E. Porter.

In terms of the methodology, the thesis pursued a qualitative approach, as four semi- structured personal interviews were conducted to collect data, which was subsequently presented and analyzed individually. Afterwards, a cross-case analysis, comparing all four cases, was carried out in order to detect similarities and differences, as well as to be able to draw conclusions from the collected data in regard to the research problem.

The results indicate that the main focus of social media usage is still in the fields of marketing and sales, but became similar important for service, respectively CRM purposes. In addition, it was discovered that it is utilized to a greater extent in the support activity firm infrastructure and started to influence human resource management, as well. All companies mainly applied the market leading platforms for the respective type of social media. The study further revealed that the sampled companies are especially concerned about challenges like the required extensive commitment of all employees, the accompanied time-intensive learning process, as well as the fast paced and complex environment of social media. Regarding the mentioned challenges, it became apparent that very important tasks are to continuously observe the current developments and encourage the employees in order to exploit the potentials of social media successfully.

ACKNOWLEDGEMENT

The topic of this research, combining several aspects of our studies, was very interesting to investigate. We wrote this thesis during the spring term of 2012 and gained a deeper understanding and knowledge about social media, its huge field of application and the challenges and risks associated with it. Although, we faced two very stressful and demanding months, this thesis has been a culmination of our studies at Luleå University of Technology.

During these two months, we achieved a lot of support from our friends and families, but we want to thank especially our thesis advisor, Anne Engström, who guided and provided us with helpful suggestions throughout the whole time. We furthermore want to thank Prof. Dr. Wolfram Schönfelder, who made it possible for us to study in Luleå and encouraged us during this time.

Finally, we want to thank Mr. Lepges, Mr. Bork, Mr. Minde and Mr. Goetz for taking their time and providing us with useful information in the interviews, as without them, this study would not have been realizable.

Luleå, May 2012

TABLE OF CONTENT

1 INTRODUCTION ...... 1 1.1 Problem Discussion ...... 2 1.2 Research Questions ...... 5

2 LITERATURE REVIEW ...... 6 2.1 Social media ...... 6 2.1.1 Types of social media ...... 8 2.1.2 Classification of social media ...... 11 2.2 Value chain ...... 13 2.3 Social media along the value chain ...... 16 2.3.1 Firm Infrastructure ...... 17 2.3.2 Human Resource Management ...... 17 2.3.3 Technology Development ...... 20 2.3.4 Procurement ...... 22 2.3.5 Logistics ...... 24 2.3.6 Operations / Production: ...... 26 2.3.7 Marketing and Sales...... 27 2.3.8 Service ...... 34 2.4 Challenges and Strategies ...... 38 2.4.1 Measuring ROI ...... 39 2.4.2 Content / Control ...... 39 2.4.3 Commitment ...... 40 2.4.4 Information Overload ...... 41 2.4.5 Headhunting ...... 41 2.4.6 Competition ...... 42 2.4.7 Data Security...... 42

3 FRAME OF REFERENCE ...... 44

4 METHODOLOGY ...... 46 4.1 Research Purpose ...... 47 4.2 Research Approach ...... 48 4.3 Research Strategy ...... 49 4.4 Sample Selection...... 51 4.5 Data Collection ...... 53 4.6 Data Analysis ...... 54 4.7 Quality Standards...... 56

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5 DATA PRESENTATION ...... 58 5.1 Case A: Sony Music Entertainment Germany GmbH ...... 58 5.1.1 Data from observation ...... 59 5.1.2 Data from the interview ...... 59 5.2 Case B: Ericsson Labs ...... 65 5.2.1 Data from observation ...... 65 5.2.2 Data from the interview ...... 66 5.3 Case C: Sony Pictures Home Entertainment GmbH ...... 71 5.3.1 Data from observation ...... 71 5.3.2 Data from the interview ...... 72 5.4 Case D: RUD Ketten Rieger & Dietz GmbH & Co. KG ...... 76 5.4.1 Data from observation ...... 76 5.4.2 Data from the interview ...... 77

6 DATA ANALYSIS ...... 80 6.1 Within-case analysis: Case A – Sony Music Germany GmbH ...... 81 6.1.1 Types of social media used by companies in different value chain activities .. 81 6.1.2 Perceived Benefits of using social media for companies ...... 82 6.1.3 Challenges faced by companies using social media ...... 85 6.1.4 Companies’ strategies to deal with these challenges...... 86 6.2 Within-case analysis: Case B – Ericsson Labs ...... 88 6.2.1 Types of social media used by companies in different value chain activities .. 88 6.2.2 Perceived Benefits of using social media for companies ...... 89 6.2.3 Challenges faced by companies using social media ...... 91 6.2.4 Companies’ strategies to deal with these challenges...... 92 6.3 Within-case analysis: Case C – Sony Pictures Home Entertainment GmbH .. 95 6.3.1 Types of social media used by companies in different value chain activities .. 95 6.3.2 Perceived Benefits of using social media for companies ...... 96 6.3.3 Challenges faced by companies using social media ...... 97 6.3.4 Companies’ strategies to deal with these challenges...... 99 6.4 Within-case analysis: Case D – RUD Ketten Rieger & Dietz GmbH & Co. KG101 6.4.1 Types of social media used by companies in different value chain activities 101 6.4.2 Perceived Benefits of using social media for companies ...... 102 6.4.3 Challenges faced by companies using social media ...... 103 6.4.4 Companies’ strategies to deal with these challenges...... 104 6.5 Cross-case analysis ...... 106 6.5.1 Types of social media used by companies in different value chain activities 106

6.5.2 Perceived Benefits of using social media for companies ...... 109 6.5.3 Challenges faced by companies using social media ...... 115 6.5.4 Companies’ strategies to deal with these challenges...... 117

7 CONCLUSIONS AND IMPLICATIONS ...... 122 7.1 Conclusion...... 122 7.1.1 Research Question 1 ...... 122 7.1.2 Research Question 2 ...... 123 7.1.3 Research Question 3 ...... 125 7.1.4 Research Question 4 ...... 125 7.1.5 Research Problem ...... 126 7.2 Managerial Implications ...... 127 7.3 Theoretical Implications ...... 127 7.4 Future Recommendations ...... 128

REFERENCES ...... 129

APPENDIX ...... 134 Interview Guide ...... 134

LIST OF FIGURES

Figure 1.1: World Wide Internet Penetration in percentage of population ...... 1 Figure 1.2: Percentages of companies with social media appearance ...... 3 Figure 1.3: Operational aspects of social media activities ...... 3 Figure 1.4:Social media activities in different departments ...... 4 Figure 2.1: The traditional marketing communication process ...... 6 Figure 2.2: An Updated Communications Model ...... 7 Figure 2.3:Social Media Landscape ...... 10 Figure 2.4: The Generic Value Chain ...... 13 Figure 2.5: The Value System ...... 15 Figure 2.6: Possible uses of social media in the value chain ...... 16 Figure 2.7:General Steps in a selection Process ...... 18 Figure 2.8: The Seven-Step Development Process ...... 20 Figure 2.9: Logistics Management Process ...... 24 Figure 2.10: Subdivision of Marketing & Sales activities ...... 27 Figure 2.11:Three Levels of a Product ...... 28 Figure 2.12: Elements of the promotion mix ...... 29 Figure 2.13: The new communications paradigm ...... 30 Figure 2.14: Process and stages of CRM ...... 35 Figure 2.16: Ambient publicity Strategies ...... 40 Figure 2.17: Four major threats to Internet security ...... 42 Figure 4.1: The research process ...... 46 Figure 4.2: Basic Types of Designs for Case Studies ...... 50 Figure 4.3: Sampling techniques ...... 51 Figure 4.4:Quality standards for validity and reliability ...... 57 Figure 6.1: Frame of references ...... 80 Figure 6.2: Social media utilization of Sony Music Germany in regard to their value-chain ...... 84 Figure 6.3: Social media utilization of Ericsson Labs in regard to their value-chain ...... 91 Figure 6.4: Social media utilization of SPHE in regard to their value-chain ...... 97 Figure 6.5: Social media utilization of RUD in regard to their value-chain ...... 103

LIST OF TABLES

Table 2.1: Classification of social media ...... 12 Table 2.2: Factors in the sales preparation ...... 31 Table 2.3: Different types of sales ...... 33 Table 2.4: Aftersales services ...... 34 Table 3.1: Research Questions ...... 45 Table 4.1: Relevant Situations for Different Research Methods ...... 49 Table 4.2: Purposive sampling strategies ...... 52 Table 4.3: Types of interviews ...... 54 Table 6.1: Used types of social media in Sony Music Germany’s value-chain activities ...... 82 Table 6.2: Summary of Sony Music Germany’s challenges regarding social media ...... 86 Table 6.3: Summary of Sony Music Germany’s strategies regarding their social media challenges ... 87 Table 6.4: Used types of social media in Ericsson Labs’ value-chain activities ...... 89 Table 6.5: Summary of Ericsson Labs’ challenges regarding social media ...... 92 Table 6.6: Summary of Ericsson Labs’ strategies regarding their social media challenges ...... 94 Table 6.7: Used types of social media in SPHE’s value-chain activities ...... 96 Table 6.8: Summary of SPHE’s challenges regarding social media ...... 99 Table 6.9: Summary of SPHE’s strategies regarding their social media challenges ...... 100 Table 6.10: Used types of social media in RUD’s value-chain activities ...... 102 Table 6.11: Summary of RUD’s challenges regarding social media ...... 104 Table 6.12: Summary of RUD’s strategies regarding their social media challenges ...... 105 Table 6.13: Comparison of different utilized social media types ...... 106 Table 6.14: Comparison of utilized social media types in Porter’s value chain activities...... 108 Table 6.15: Comparison of perceived benefits in the value chain activity firm infrastructure ...... 110 Table 6.16: Comparison of perceived benefits in the value chain activity HRM ...... 110 Table 6.17: Comparison of perceived benefits in the value chain activity marketing and sales ...... 113 Table 6.18: Comparison of perceived benefits in the value chain activity service or CRM ...... 114 Table 6.19: Comparison of challenges faced by companies regarding social media ...... 115 Table 6.20: Most significant challenges faced by companies in regard to social media ...... 117 Table 6.21: Strategies to deal with the challenge concerning commitment ...... 117 Table 6.22: Strategies to deal with the time-intensive learning process ...... 118 Table 6.23: Strategies to deal with the vanishing of platforms and user data ...... 119 Table 6.24: Strategies to deal with the loss of control over content ...... 120 Table 6.25: Strategies to deal with data security issues ...... 120 Table 6.26: Strategies to deal with the challenge of specific targeting ...... 121 Table 6.27: Strategies to deal with the piracy issues ...... 121

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1 INTRODUCTION

In the following section, background information about the current Internet development and its latest trend regarding social media will be given. Subsequently, the problem discussion narrows down the topic and ends with the definition of the research problem and questions, which are answered in the main part and illustrate the reason for this thesis.

Since the commercialization of the Internet in 1995 and the first steps into a new world of public information exchange, a continuous evolvement, caused by technological development, was observable and more and more individuals and companies were able to take advantage of the Internet and the services it provides. Nowadays, in an era of affordable broadband Internet, nearly one third of the world’s population has access to the World Wide Web, as the bar graph in figure 1.1 below reveals.

Figure 1.1: World Wide Internet Penetration in percentage of population Source: Internet World Stats (2011)

Besides technological developments, providing a broader range of people access to the Internet, another crucial point in the evolvement of the Internet was the introduction of Web 2.0, “a term that was first used in 2004 to describe a new way in which software developers and end-users started to utilize the World Wide Web; that is, as a platform whereby content and applications are no longer created and published by individuals, but instead are continuously modified by all users in a participatory and collaborative fashion." (Kaplan &

Haenlein, 2010, p. 60-61) On the basis of this technology social media arose, which are “a group of Internet-based applications that build on the ideological and technological foundations of Web 2.0, and that allow the creation and exchange of User Generated Content”. (Kaplan & Haenlein, 2010, p. 61) Social media are today a firmly established part of our everyday life and can no longer be missed, as the biggest Social Networks record an enormous user base. Regarding a case study concerning “Social Media Demographics” conducted by onlinemba.com, the top 3 social networks in terms of active users are Facebook with 845 million, Twitter with 127 million and Google+ with 90 million. (Onlinemba, 2012) Concerning these numbers, social networks are already very successful in the private use and appear with increased regularity at workplaces in the form of Xing and LinkedIn, which focus on a professional perspective. There exist also a various amount of different social media types, which faded into the background because of the success of social networks and will be described in detail in the following chapters. The purpose of this thesis deriving from that development is, to describe the organizational utilization of social media, which leads to the problem discussion.

1.1 PROBLEM DISCUSSION

The two main subjects regarding this thesis are on the one hand the previously discussed trend of social media and on the other hand, their possible connection to business activities. These are defined and arranged by Porter (1998) in a so called value chain to achieve competitive advantage and will be further described in the theory section. Adding value is vital in times of fierce competition, which derives from an on-going globalization and constantly new technological developments (Wild & Wild, 2012, p. 26). One of the current main developments is the mentioned social media. The purpose of a value chain is to examine such possible sources in terms of how it could help to create added value to a company.

According to the IBM 2010 CEO Study, one of the top priorities for CEOs is to get closer to their customers. (Capitalizing on Complexity, 2010, p.39) In order to achieve this goal, companies need to be present where customers are, and regarding the earlier mentioned growing Internet adoption in general, as well as numbers about the development of social media, respectively social networks, this is the new, virtual hub of customers. Since companies became aware of the worldwide expansion of social media usage, they feel pressured to get involved in it as well. This is supported by a research study, conducted by Baird and Parasins (2011b, p. 3), where they state that “nearly 70% of executives say their

2 companies will be perceived as ‘out of touch’ if they don’t engage. Two thirds (67%) say they need a social media presence to attract top employees and more than half (58%) believe their competition is successfully reaching customers through social media”. (Baird & Parasnis, 2011b, p. 3) Furthermore, the study revealed that the majority of companies have some kind of social media appearance, in order to not miss its provided potential, as visualized in figure 1.2 below.

Figure 1.2: Percentages of companies with social media appearance Source: Baird & Parasnis, 2011b, p. 3

This high number results mainly from competitive pressure, as the study also discovered that only less than a third of respondents report that their company has a clear strategy for the usage of social media. Forty percent agree that they only have some “kind of” strategy to a certain degree and the rest no strategy at all. (Baird & Parasnis, 2011b, p. 5) In addition to the lack of an existing strategy, companies seem to forget about the common rules of strategic management when it comes to social media, because a high percentage does not have defined key performance indicators (KPI), clear social media policies or social media governance as shown in figure 1.3 below, which are vital parts of a consolidated and comprehensive strategy. (Baird & Parasnis, 2011b, p. 6)

Figure 1.3: Operational aspects of social media activities

Source: Baird & Parasnis, 2011b, p. 7 Moreover, the study revealed that the majority of respondents see the potential and those responsible for social media activities mainly in the marketing and communication, more or less neglecting the other departments, which can be seen in figure 1.4.

Figure 1.4:Social media activities in different departments Source: Baird & Parasnis, 2011b, p. 6

This focus on solely the marketing perspective for the use of social media shows on the one hand, the early stage of the development of this opportunity and on the other hand, the lack of research about the social media usage in other activities. During our review of literature about social media, we found a huge amount of scientific articles about the potential of social media for marketing or communication activities, but only a very few concerning their potential for other business activities.

Therefore, we noticed the need and challenge to explore this rather uninvestigated area, to examine what other opportunities are accompanied by the development of social media, besides marketing. Furthermore, we want to explore and analyze how certain companies are currently using social media and if there is already a recognizable change in respect to existing studies and theories.

With regard to this discussion, the research problem of this thesis can be formulated as:

How do social media influence companies’ activities along their value chain? 4

1.2 RESEARCH QUESTIONS

In order to be able to investigate our research problem properly, we came up with the following research questions, which are supposed to help us to answer it.

Research Question 1: First of all, it is vital to explore if and where social media is used to see what parts of the value chain and how social media affects them. In addition, it is crucial to investigate if companies have a coherent strategy for their social media usage or if they use it isolated for certain activities.

RQ1: What types of social media do companies use in different value chain activities?

Research Questions 2: Secondly, it is important to analyze why companies decide to use social media and what they hope to achieve with its usage.

RQ2: How can the perceived benefits of using social media for companies be described?

Research Question 3: Since there is no perfect tool or strategy for companies, the usage of social media also entails certain disadvantages, which need to be examined in terms of relevance to the companies.

RQ3: How can the challenges, faced by companies using social media, be described?

Research Question 4: In the end, it is important to analyze how companies are trying to overcome these disadvantages, if they recognize them.

RQ4: How can the companies’ strategies to deal with these challenges be described?

2 LITERATURE REVIEW

After an introduction to our research problem was made in Chapter 1, the following section will provide already existing theories and findings in the field of social media, as well as the basic principles regarding Porter’s value chain. In addition, theoretical approaches towards a linkage of the value chain and possible social media fields of application will be investigated in order to provide the basis for a theoretical framework, which will be conceptualized in the subsequent Chapter 3.

2.1 SOCIAL MEDIA

With the introduction of social media and the strengthened interaction between participants within these applications, the perception of passive consumers has to be rethought, as people continuously play more proactive roles in communications (Solomon, 2011, p. 273). For the purpose of clarifying the process of delivering a certain message to the audience, the traditional communication model had been consulted so far, as displayed in figure 2.1 below. This model illustrates the three required elements for an effective communication – the sender, the message, and the receiver – connected by a message channel (Czinkota & Ronkainen, 2007, p. 387).

Sender Message Receiver Encodes Message, Message Based on Objectives Channel Decodes Message

Noise

Communication Feedback Outcome

Figure 2.1: The traditional marketing communication process Source: Czinkota & Ronkainen, 2007, p. 387

Encoding a message describes the process of converting it into a symbolic form so that the message will be interpreted and understood by the receiver. In order to do this in a successful manner, certain knowledge about the target’s characteristics is necessary. The message is subsequently transmitted to the receiver by making use of message channels,

6 which simply describe the medium through which the message moves from sender (source) to receiver and ranges from sound waves conveying human voice in personal selling to transceivers or intermediaries such as print and broadcast media. The receiver’s proper decoding, the transforming the message symbols back into thought represents the crux in this process and determines its success. How well the purpose of the sent message, respectively the communication outcome, for example “generating more awareness, a more positive attitude, or increased purchases”, has been fulfilled and how successful the communication efforts were, has to be analyzed by collecting and observing feedback. The entire process is continuously influenced by external and distracting stimuli, which interfere with the intended accurate reception of the message, symbolized in the figure above as noise. (Czinkota & Ronkainen, 2007, p. 387-388)

Based on the new possibilities offered by social media in terms of interpersonal communication among participants, Solomon (2011, p. 273) redefined the communication process, as it can be seen in figure 2.2 below.

Figure 2.2: An Updated Communications Model Source: Solomon, 2011, p. 273

While the basic procedures of the traditional communication model still apply, the roles of a clearly defined sender and receiver have vanished. Every participant within this process can take either role and additionally send messages in between, with the social media application taking the role of the communication medium.

2.1.1 TYPES OF SOCIAL MEDIA

Because of the earlier mentioned Web 2.0 developments, Internet users are able to participate more and more in the content creation and provision, besides only using it as information source. Hence, a lot of Internet services emerged from and are geared to user generated content, which is further connected with already existing content. In the course of this development, several Web 2.0 offers that encourage the interaction between members have come up, which are displayed below and will be described afterwards. (Cyganski & Hass, 2008, p.102)

 Tagging  RSS-Feeds  Podcasts  Weblogs / Blogs  Wikis  Media-sharing sites  Social bookmarks / news sites  Social network platforms

Tagging: According to Social Tagging (2011), a tag is considered as an arbitrary text label associated with a resource and tagging in general is the indexing method of associating tags with resources, which is normally used for personal information and later retrieval. This can be further narrowed down to social tagging, which is tagging in an open online environment where the tags of one user become available to the public. (Social Tagging, 2011)

RSS-Feeds: Seite: 8 RSS is based on a XML format and platform-independent, which is designed to exchange all sorts of web-content, where the short stands for “Really Simple Syndication”. Therefore, RSS-Feeds can have different suffixes like “xml”, “rss” or “rdf”, which do not influence its function in order to be able to publish or receive frequently updated content in a standardized format. (RSS-Verzeichnis, s.a.)

Podcasts: Podcasts can be referred to different media files like audio or video, which are usually linked to a RSS-Feed and produced by anybody willing to upload web content, a so-called Podcaster. The act of publishing and providing these services of downloading and streaming free content from the Internet via subscription is called Podcasting. (Podcast, s.a.)

Weblogs / Blogs: Blog is simply the shortcut of Weblog, describing the same social media type and is a sort of content management system (CMS) that facilitates the publishing of short articles, also referred to as ‘posts’ (E-Teaching, 2010). Blog software provides a variety of social features, including comments, blogrolls, trackbacks and subscriptions. (Zarrella, 2010, p. 9) In addition to clarify this, a blogroll is considered as a list of links to other blogs that many bloggers have in their sidebars as recommendations” and a trackback is a “notification from one blog to another that the sender has pointed a link at the receiver (Zarrella, 2010, p. 19).

Wikis: Same as blogs, a wiki is an easy and simple type of content management system, which allows publishing content on the Internet. The exception about wikis is their openness in contrary to blogs; the published content can be edited, extended or deleted by every user. (E-Teaching, 2011) The best-known wiki is probably Wikipedia the online encyclopedia, which provides users with definitions and explanations on almost every topic in a broad variety of languages.

Media-sharing sites: Media sharing sites include portals for video and audio sharing, which allow users to create and upload multimedia content, sometimes called user generated content. Furthermore, these sites include social features for members, like commenting on and rating the provided content, but most users are not members and are mainly consuming, instead of contributing. According to Zarella (2010, p. 77), media-sharing sites have become extremely popular with the advent of easy-to-use digital cameras and camcorders, as well as high-speed Internet connections. This fact is supported by the statistics of YouTube, which is the best-known video sharing site, where over 4 billion videos are viewed a day and over 800 million unique users visit the website each month. (YouTube, s.a.) In addition, one of the most popular photo sharing sites, Flickr.com, was hosting more than 5 billion images by the end of December 2010. (Browser Media, 2011)

Social bookmarks / news sites: Social news sites are considered as websites that allow users to submit and vote on content from around the world, where the voting activity helps isolate most interesting links (Zarrella, 2010, p. 103). Social bookmarks are a type of social news sites, with the focus on users to collect and store interesting links, in order to discover new ones and share their own with the public. (SocialBookmark, s.a.)

Social network platforms: Social networks are platforms, enabling the establishment of virtual networks or so-called communities. They constitute a communication platform in order to maintain and to form personal contacts. There are several types of social networks for different target groups like business people, students or without a special alignment, like Facebook for example, the most popular social network at the moment. (Cyganski & Hass, 2008, p. 103, own translation) Another feature of social networks is their expansion of functionality through application programming interfaces (APIs) for developers, allowing them to create applications that can be embedded into their site. Some of these applications function either as add-ons to a profile and page, enhancing the functionality, or like standalone applications inside the network that leverage the functionality contained in the site (Zarrella, 2010, p. 65).

In order to provide a summarization and better overview of the different types of social media, figure 2.3 is added to display the various existing platforms.

Figure 2.3:Social Media Landscape Source: Fred Cavazza, 2011

2.1.2 CLASSIFICATION OF SOCIAL MEDIA

Since the first steps in the era of Web 2.0 and social media, a huge variety of applications has been emerged, as previously revealed. For the purpose of classifying the different variations of social media and in order to clarify what exactly should be included under this term, and how Social Media differ from the seemingly-interchangeable related concepts of Web 2.0 and User Generated Content, a classification scheme had been developed by Kaplan and Haenlein (2010, p. 60). They define social media as “a group of Internet-based applications that build on the ideological and technological foundations of Web 2.0, and that allow the creation and exchange of User Generated Content”. User generated content in means of social media can be considered as published either on a publicly accessible website or on a social networking site accessible to a selected group of people, and furthermore has to show a certain amount of creative effort and be created outside of professional routines and practices. (Kaplan & Haenlein, 2010, p. 61)

The classification scheme is based on “a set of theories in the field of media research (social presence, media richness) and social processes (self-presentation, self-disclosure), the two key elements of Social Media” (Kaplan & Haenlein, 2010, p. 61). It classifies the applications within a two-dimensional matrix regarding these two factors and their respective degree. On the one hand, the media research component is based on social presence, which is defined as “the acoustic, visual, and physical contact that can be achieved” and allow “to emerge between communication partners”. The degree of social presence correlates with the “social influence that the communication partners have on each other’s behavior” and is furthermore influenced by intimacy (interpersonal vs. mediated) and immediacy (asynchronous vs. synchronous) of the medium. The second component of the media research field is media richness and is “based on the assumption that the goal of any communication is the resolution of ambiguity and the reduction of uncertainty”. Kaplan and Haenlein (2010, p. 61) state that media differs in the degree of richness they possess, meaning that the amount of information they allow to be transmitted in a given time interval differs and therefore the media vary in terms of effectiveness, resolving ambiguity and uncertainty. Social processes, the second dimension of Kaplan’s and Haenlein’s classification, consist of self-presentation and self-disclosure and is determined by “the degree of self-disclosure it requires and the type of self-presentation it allows” (Kaplan & Haenlein, 2010, p. 62) The authors argue in reference to Goffman (1959), that in any type of social interaction, people have the desire to control the impressions that other people form of them. Furthermore, Goffman (1959) clarifies that this is achieved by the objective of influencing others to gain rewards and is driven by the desire to create an image that matches one’s personal identity (quoted in

Kaplan & Haenlein, 2010, p. 61-62). Self-presentation is usually achieved by self-disclosure, “the conscious or unconscious revelation of personal information (e.g., thoughts, feelings, likes, dislikes) that is consistent with the image one would like to give” and may occur during the development of close relationships or between complete strangers. (Kaplan & Haenlein, 2010, p. 62)

Based on these two dimensions, Kaplan and Haenlein developed a classification scheme for social media as shown below in table 2.1, classifying the various types of applications regarding their degree of social presence/media richness and self-presentation/self- disclosure and granting the opportunity for future social media to be categorized as well.

Table 2.1: Classification of social media Social presence / Media richness

Low Medium High Blogs Social networking Virtual social worlds

High Sites (e.g. Second Life) Self- (e.g. Facebook) presentation / Collaborative Content communities Virtual game worlds Self-disclosure Low projects (e.g. YouTube) (e.g. World of Warcraft) (e.g. Wikipedia) Source: Kaplan & Haenlein, 2010, p. 62

2.2 VALUE CHAIN

In the age of an on-going globalization, with new technologies decreasing costs of global communication and travel, as well as countries reducing barriers to trade and investments, competition intensifies on a global scale. (Wild & Wild, 2012, p. 26) In order to manifest their market position, companies more than ever have to gain a competitive advantage over other market participants. A competitive advantage is “something that provides an incremental value when compared to other offerings” (Dwyer & Tanner, 2009, p. 23), by allowing a company to “differentiate its product offering and offer more utility to its customers and to lower its cost structure” (Hill & Jones, 2010, p. 85). This incremental value can be stated as “equivalent to profit for the buyer; it is the perception of how much the buyer benefited beyond what was paid or invested in the product” (Dwyer & Tanner, 2009, p. 22).

For the purpose of examining possible sources of competitive advantage, Michael E. Porter introduced the concept of the value chain. The value chain “disaggregates a firm into its strategically relevant activities in order to understand the behavior of costs and the existing and potential sources of differentiation”. (Porter, 1998, p. 33) By performing and executing these strategically important activities cheaper or better than its competitors a company gains competitive advantage. (Porter, 1998, p.34) The activities of a company can be categorized into two major types, namely primary and support activities, as displayed in figure 2.4 below. Primary activities are “involved in the physical creation of the product and its sale and transfer to the buyer as well as after-sale assistance”. Support activities support the primary activities and each other by providing purchased inputs, technology, human resources, and various firmwide functions”. Besides the previously mentioned value activities the value chain consists of margin, “the difference between total value and the collective cost of performing the value activities”. (Porter, 1998, p. 38)

Figure 2.4: The Generic Value Chain Source: Porter, 1998, p. 37

According to Michael E. Porter (1998, p.39-40), the primary activities, can be divided into five “generic categories” and are defined, as follows:

 Inbound Logistics: Activities associated with receiving, storing and disseminating inputs to the product, such as material handling, warehousing, inventory control, vehicle scheduling, and returns to suppliers.

 Operations: Activities associated with transforming inputs into the final product form, such as machining, packaging, assembly, equipment maintenance, testing, printing, and facility operations.

 Outbound Logistics: Activities associated with collecting, storing and physically distributing the product to buyers, such as finished goods warehousing, material handling, delivery vehicle operation, order processing, and scheduling.

 Marketing and Sales: Activities associated with providing a means by which buyers can purchase the product and inducing them to do so, such as advertising, promotion, sales force, quoting, channel selection, channel relations, and pricing.

 Service: Activities associated with providing service to enhance or maintain the value of the product, such as installation, repair, training, parts supply, and product adjustment.

These primary activities are supported by four major support activities, namely procurement, technology development, human resource management, which can be directly associated with specific primary activities as well as support the entire chain and firm infrastructure, which has an impact on the entire value chain only. (Porter, 1998, p.38)

 Procurement: Refers to the function of purchasing inputs used in the firm's value chain, not to the purchased inputs themselves. Purchased inputs include raw materials, supplies, and other consumable items as well as assets such as machinery, laboratory equipment, office equipment, and buildings. (Porter, 1998, p. 41)

 Technology development: Every value activity embodies technology, be it know-how, procedures or technology embodied in process equipment. The array of technologies employed in most firms is very broad, ranging from those technologies used in preparing documents and transporting goods to those technologies embodied in the product itself. (…) Technology development that is related to the product and its features supports the

entire chain, while other technology development is associated with particular primary or support activities. (Porter, 1998, p. 41-42)

 Human resource management: Consists of activities involved in the recruiting, hiring, training, development, and compensation of all types of personnel. Human resource management supports both individual primary and support activities (e.g., hiring of engineers) and the entire value chain (e.g., labor negotiations). (Porter, 1998, p. 42)

 Firm infrastructure: Consists of a number of activities including general management, planning, finance, accounting, legal, government affairs and quality management. (Porter, 1998, p.43)

In addition to the possible sources for competitive advantage within a company and its activities, Porter (1998, p. 34) determines the necessity of understanding not only a firm’s value chain but how the firm fits in the overall value system. The value system contains in addition to the company itself of suppliers’, channels’ and consumers’ or buyers’ individual value chains, as shown in figure 2.5 below. While Suppliers’ upstream value results from creating and delivering the purchased inputs used in a firm’s chain, channel value is created when products pass through the value chains of channels on their way to the buyer. (Porter, 1998, p. 34)

Figure 2.5: The Value System Source: Porter, 1998, p. 35

Between the value chain of the company and the suppliers’, respectively channels’, one linkages occur, as Porter (1998, p. 50) states, because the way supplier or channel activities are performed affects the cost or performance of a firm’s activities and vice versa. These interdependencies reveal further opportunities for the firm to enhance its competitive advantage. By overlooking these linkages constantly and by influencing the configuration of suppliers’ value chains, respectively channel value chains, to jointly optimize the performance of activities, or by improving coordination between both, benefits may arise for both parties. (Porter, 1998, p.51)

2.3 SOCIAL MEDIA ALONG THE VALUE CHAIN

Cyganski and Hass (2008, p. 102, own translation) claim that virtual social networks are nowadays mainly used for private issues, while on an organizational basis, an individual usage for one’s own good, for example of the entrepreneur or the employees for marketing themselves. Consequently, the authors reveal potentials for utilizing social media within different business functions and departments by taking Porter’s value chain into consideration and pinpointing in which activities social media might be used, as shown in figure 2.6 below. Subsequently, the various activities and the differing possible uses are examined by Cyganski and Hass.

Figure 2.6: Possible uses of social media in the value chain Source: Adapted from Cyganski & Hass, 2008, p. 105, own translation

As figure 2.6 above reveals, Cyganski & Hass (2008, p. 105, own translation) determine that social media can be used “within any activity which involves persons, contacts and knowledge”, but emphasize on social media’s promising utilization within the supporting activities, namely human resource management, technology development and procurement. Within the primary activities, social media are mainly used concerning marketing and sales. For the purpose of “exchanging information and knowledge, initiating and maintaining cooperation, as well as for market analyses”, social media can be adapted comprehensively. (Ibid.)

2.3.1 FIRM INFRASTRUCTURE

Firm infrastructure implies a broad variety of activities, as previously mentioned and unlike other support activities, usually supports the entire chain and not individual activities. (Porter, 1998, p. 43) Hill and Jones (2010, p. 84) define company infrastructure as “the company- wide context within which all the other value creation activities take place: the organizational structure, control systems, and company culture.” Furthermore, top management should be implied within the firm infrastructure, as strong leadership can influence and shape a company’s infrastructure, as well as the performance of all other value-creation activities that take place within it (Hill & Jones, 2010, p. 84).

Cyganski and Hass (2008, p. 109, own translation) reveal opportunities, pervading all value chain activities, namely the knowledge- and information exchange as well as the initiation of cooperation by using social business networks. According to Jung, Bruck and Quarg (2007), the “exchange of knowledge will be simplified, as the mutual contacting, the possibility for specific searches and the willingness to provide and share information exists”. (quoted in Cyganski & Hass, 2008, p. 110, own translation) Therefore the “prior split knowledge will be linked and under certain circumstances ‘collective knowledge’ will be created”. (Cyganski & Hass, 2008, p. 109-110, quotation from Lévy, 1998, own translation)

2.3.2 HUMAN RESOURCE MANAGEMENT

Ebert (2012, p. 194) defines human resource management (HRM) as a “set of organizational activities directed at attracting, developing and maintaining an effective workforce”. Over the recent decades HRM became strategically more important, because of increased legal complexities, the recognition that human resources are a valuable means for improving productivity, and an awareness of the costs associated with poor human resource management. (Ebert, 2012, p. 194-195)

A major activity within HRM is the recruiting of workforce, referred to the process of attracting qualified people to apply for available jobs (Ebert, 2012, p. 196). Recruiting can take place either internally, by considering present employees as candidates for openings or externally, by attracting people outside the organization to apply for jobs. While internal recruiting methods can be based on a skills inventory system or recommendations by managers, external recruiting methods include advertising, campus interviews, employment agencies or

17 executive search firms, union hiring halls, referrals by present employees, and hiring “walk- ins” (people who show up without being solicited). (Ebert, 2012, p. 196)

After potential applicants have been determined, a selection process has to be conducted to filter out a prospective employee to hire. This process is called validation and its intent is to “gather information from applicants that will predict their job success and then to hire the candidates likely to be most successful”. (Ebert, 2012, p. 197-198) As shown in figure 2.7 below, a huge variety of procedures can be utilized individually or subsequently.

Figure 2.7:General Steps in a selection Process Source: Ebert, 2012, p. 199

When a company was able to find and hire a suitable employee, the recruitment process itself is completed and followed by a further major activity within HRM, the development of human resources. This activity includes the introduction of new employees to their job, as well as to the company itself, including its history, structure, culture, and benefits programs. In addition to the introduction of newly hired workforce, this activity is concerned with the training of employees and their development of necessary job skills, the measurement of the employees’ performance and giving feedback. (Ebert, 2012, p. 200-201)

In reference to Hartl et al. (1998), Cyganski and Hass state that the focus of online business communities is primarily on the cross-linking, respectively networking, of people and therefore offers opportunities for recruiting and evaluating prospective employees. (2008, p. 105-106) Because a lot of people provide a huge amount of information regarding their work experience and their past employers online, head hunters are given the opportunity “to specifically look for candidates by considering qualifications, company belonging or position and to contact them”. (Cyganski & Hass, 2008, p. 106, own translation)

After recruiting comes usually the phase of onboarding, where the new hires have to be incorporated in the company and adapt to the new working environment. According to Tulgan (2007), social media tools like podcasts could be recorded with existing employees about their onboarding process so the new hires know what to expect when they arrive and to shorten the adjustment phase. Next to hiring new personnel, social media can be applied by employees within a company to make connections between the tasks, responsibilities and roles they want and the skills, experience and contacts that lead to future career opportunities. (Tulgan, 2007)

Another potential of the utilization of social media within the human resource management exists for the validation of potential applicants, as further information can be gathered from their documents of application, job interviews, as well as from information provided within networks. In addition to the augmented possibilities to evaluate the applicant, “interconnected third party contacts can give feedback regarding their work habits and skills”. (Cyganski & Hass, 2008, p. 106, own translation)

A further opportunity to make use of social media within this business field is the possibility to stay in contact with former employees in alumni networks in order to ensure networking exceeding the time of the belonging to the company (Cyganski & Hass, 2008, p. 106-107, own translation) / (Tulgan, 2007). Furthermore, the authors determine this as an important resource for organizations, which should systematically maintain these contacts in an age of “shortening times of stay of employees”. (Cyganski & Hass, 2008, p. 106-107, own translation)

Moreover, social media can be used to support training and development by providing information in a range of different media like a podcast and a wiki page, in order to give employees more options and control over their learning experience. (Tulgan, 2007) In addition to this, Tulgan (2007) suggests an introduction of a reward system for employees who provide this information.

Tulgan (2007) addresses flexibility and describes how a company can use social media to overcome the increasing demand for work-life balance options for example by recording a podcast of a meeting and upload it onto a company intranet to help flexible workers remain updated on the latest discussions. Furthermore, he suggests the use of an internal blog in order to provide simple, fast, widespread information-sharing and encourage a sense of community. (Tulgan, 2007)

2.3.3 TECHNOLOGY DEVELOPMENT

The third support activity of Porter’s value chain, in which social media can be utilized, is technology development. Regarding Ebert’s definition (2012, p. 43), technology includes “all the ways by which firms create value for their constituents”, this contemplates “human knowledge, work methods, physical equipment, electronics and telecommunications, and various processing systems that are used to perform business activities”.

Technology development is, according to Porter (1998, p. 42), often solely associated with the term research and development (R&D), which provides “new ideas for products, services and processes”. (Ebert, 2012, p. 43) R&D can be subsequently broken down into two varying types, basic (or pure) R&D and applied R&D. While basic research and development implies “improving knowledge in an area without a primary focus on whether any discoveries that might occur are immediately marketable”, applied R&D “focuses specifically on how a technological innovation can be put to use in the making of a product or service that can be sold in the marketplace”. (Ebert, 2012, p. 43) For the purpose of developing new innovative products, a basic seven-step process had been conceptualized, as displayed in figure 2.8 below.

•Product development begins with a search for ideas. Product ideas can 1. Product ideas come from consumers, the sales force, research and development people, or engineering personnel

•In this stage, the goal is to eliminate product ideas that do not match the 2. Screening firm's abilities, expertise, or objectives. Representatives from marketing, engineering, and production must have input at this stage.

•Once the top concepts have been selected, companies use market 3. Concept testing research to solicit consumer input and identify key benefits as well as an appropriate price level.

•This stage involves developing estimates of costs versus benefits. The aim 4. Business analysis is not to determine precisely how much money the product will make, but to see whether the product can meet minimum profitability goals.

•At this stage, product ideas begin to take shape. Using input from the 5. Prototype development concept-testing phase, engineering and/or research and development produce a preliminary version of the product.

•Using what it learned from the prototype, the company goes into limited 6. Product testing and test production of the item. This stage is very costly, since promotional campaigns and distribution channels must be established for test marketing markets. But test marketing gives a company its first information on how consumers will respond to a product under real market conditions.

•If test-marketing results are positive, the company will begin full-scale 7. Commercialization production and marketing of the product.

Figure 2.8: The Seven-Step Development Process Source: Ebert, 2012, p. 351-352

Besides the aspect of technology development, which is directly associated with the product and its improvement, Wild and Wild (2012, p. 32) clarify that the development in information technology and transportation methods facilitate, speed up and reduce the costs of moving data, goods and equipment around the world by examining groundbreaking enhancements pervading all kinds of business activities. Especially the nearly comprehensive Internet penetration simplifies the communication for organizations internally, as well as externally. By taking advantage of e-mail, videoconferencing, the World Wide Web, intranets and extranets, reaching out to possible suppliers, customers or any other contacts, just as gathering information and collaborating has never been easier before. (Wild & Wild, 2012, p. 32-33)

Social media have the potential to support both R&D and the technology development, as Cyganski and Hass state (2008, p. 107, own translation), potentials of using social media arise especially in the area of initiations of cooperation, as organizations are able to precisely look for companies and possible cooperation partners in social networks. Within these networks, a huge number of organizations are present and therefore partners can be reached and contacted, which would have been else impossible or only at great expenses. (Ibid.)

In a cross-company study with companies that pioneered in the usage of social media tools for their product development, Bertoni and Chirumalla (2011, p.555) found out that one major benefit of Larsson’s et al. (2008) Engineering 2.0 approach is seen in the identification of new product opportunities. In that case, the authors state that Web 2.0 tools could be used to make product developers aware of the current customer trends and support the team in collecting, filtering and validating the different inputs. (Bertoni & Chirumalla, 2011, p. 556)

One possibility to explot this potential is to transform the so-called “corridor discussions” into forms of a wiki or a blog to increase the network around a certain problem area. (Bertoni & Chirumalla, 2011, p. 556) Payne (2008) and Jim (2009) agree that weblogs might be used as a feedback platform for external stakeholders and employees to engage them in discussions on product and service offers. (cited in Bertoni & Chirumalla, 2011, p. 556) Furthermore, product developers could use RSS feeds to subscribe to their chosen content resources in order to receive the current updates and forward “relevant information to the users at the right time in the right place.” (Bertoni & Chirumalla, 2011, p. 556-557)

Tagging practices may facilitate to gather organization-wide information, besides limiting it to the product development boundaries, if information from multiple sources is tagged in the

21 same way. In addition, Microblogs might help to spread innovative ideas, quotes or links that could be useful to others and allow them to provide real-time and specific feedback on technical or service matters. (Bertoni & Chirumalla, 2011, p. 557)

While Bertoni, Chirumalla and the several cited authors promote the sharing of knowledge as excessive as possible, Cyganski and Hass (2008, p. 107, own translation) argue that the collaborative exchange of ideas and knowledge regarding R&D is rather used on an internal basis, because of the “sensibility of information”. Within these internal networks employees and business partners develop a collaborative knowledge and information base, which promotes a subject-specific exchange and records problems, topics and know-how. Additionally, a mutual support and collaboration among employees and business partners is promoted by the utilization of business networks, which can affect all business activities. (Ibid.)

2.3.4 PROCUREMENT

Porter (1998, p.41) defines procurement as “the function of purchasing inputs used in the firm’s value chain” and therefore focuses on the function and not the inputs themselves. These purchased inputs are omnipresent and needed throughout all activities of a company’s value chain, including primary, as well as support activities. (Ibid.) Derived from the closely related term purchasing, procurement involves not only the process for buying necessary inputs, respectively goods and services, but rather all necessary activities to acquire goods and services needed. (Tassabehji & Moorhouse, 2008)

Based on a literature review in the field of procurement and supply management, Quesada, González, Mueller and Mueller (2010, p. 519) determined five consecutive steps regarding procurement practices, namely information gathering, supplier contact, contracting, requisitioning and intelligence/analysis.

Information gathering Referring to Webster’s and Wind’s conceptual work for the purpose of understanding organizational buying behavior and their definition of the buying tasks (1972, p. 16), Quesada et al. (2010, p. 519) determine how information is gathered. The five subsequent tasks have

22 to be performed in order to overcome a previously occurred buying problem. (Webster & Wind, 1972, p. 16)

 (1) Identification of need  (2) Establishment of specifications  (3) Identification of alternatives  (4) Evaluation of alternatives  (5) Selection of suppliers

Supplier contact After the needed information has been gathered, the selected suppliers are contacted for the purpose of requesting quotes, proposals, information and bids. (Quesada et al., 2010, p. 519)

Contracting The subsequent step in this conceptual procurement practices model is contracting, which is the result of successful negotiations. (Quesada et al., 2010, p. 519)

Requisitioning At this stage, previously successfully negotiated contractual conditions are carried out and the transaction of goods and services in exchange for monetary or non-monetary compensation takes place. (Quesada et al., 2010, p. 519)

Intelligence and analysis The final procurement practice, intelligence and analysis, is defined according to Berger and Gattorna (2001) as “the identification, collection and use of internal and external data to enable procurement to make smart sourcing decisions”. (quoted in Quesada et al., 2010, 2010, p. 519)

Similar to the utilization of social media in the field of technology development, searches regarding possible suppliers can be conducted in regard to specific industries or products and third party or mutual contacts can be consulted (Cyganski & Hass, 2008, p. 107, own translation). Additionally, social networks can help companies to stay in contact with previous suppliers and business partners, respectively “to maintain a subject-specific exchange for the purpose of developing and initiating future tasks or ideas in collaboration”. (Cyganski & Hass, 2008, p. 108, own translation)

2.3.5 LOGISTICS

According to Porters’ value chain, inbound and outbound logistics are separate parts. But the reviewed theory often combines both to solely logistics and draws the conclusion that it must be seen as link between the marketplace and the supply base since the scope spans over the whole organization, from the management of raw materials through the delivery of the final product. (Christopher, 2011, p. 11) (Skjøtt-Larsen et al., 2007, p. 22) The underlying concept of logistics is defined as “the process of strategically managing the procurement, movement and storage of materials, parts and finished inventory, as well as the related information flows, through the organization and its marketing channels in such a way that current and future profitability are maximized through the cost-effective fulfillment of orders.” (Christopher, 2011, p. 2)

Skjøtt-Larsen et al. (2007, p. 22) state that the major contribution of logistics is the product flow within an organization and crossing functional boundaries, where materials and other resources enter, are transformed through production and later on delivered to the final customer. Christopher (2011, p. 2) basically agrees with that statement but adds the information flow to the process, visualized in the logistics management process as seen in figure 2.9 below.

Figure 2.9: Logistics Management Process Source: Christopher, 2011, p. 11

According to Skjøtt-Larsen et al. (2007, p. 22), the tools of logistics are transportation, inventory and information. Furthermore, the authors mention that logistics focuses on functional integration such as balancing product capacity against holding finished product inventory within each firm or trade-offs between fast, but expensive airfreight versus slower, but cheaper sea transport and high safety stocks. (Ibid.)

These activities need to be planned and coordinated to achieve desired levels of delivered service and quality at lowest possible costs, which is part of the mission of logistics management (Christopher, 2011, p. 11). Logistics within a supply chain has a lot of potential to accomplish lower costs by increasing efficiency and productivity, which can be improved by reducing or eliminating inventory costs through sharing information on demand and current stock levels (Christopher, 2011, p. 3).

To conclude, logistics is an “integrative concept” that tries to develop a holistic view of the firm by creating a framework that transforms the needs of the customers into a manufacturing strategy and plan, which results into a strategy and terms for procurement. (Christopher, 2011, p. 13) Christopher further suggests that “there should be a ‘one-plan’ mentality within the business, which seeks to replace the conventional standalone and separate plans for marketing, distribution, production and procurement.” (Christopher, 2011, p.13)

Hazen and Byrd (2012) did a recent research about the most relevant logistics information technology (LIT) artifacts in supply chain management (SCM) literature. They defined LIT as an “IT application that is perceived as new to the organization of adoption that is used for planning, implementing, and/or controlling procedures for the transportation and storage of goods and services from the point of origin to the point of consumption“. (Hazen & Byrd, 2012, p. 9) In order to trawl through the appropriate articles, they considered 20 SCM journals for research. As result of the content analysis they found a listing of 28 unique IT innovation artifacts, but many of these technologies did not receive a lot of attention. However, EDI and RFID emerged as the two most relevant and current technologies, accounting for 32% of all articles in which IT is the primary focus. (Hazen & Byrd, 2012, p. 13)

According to Rida, Yang et al. (2010), radio frequency identification (RFID) is an emerging compact wireless technology to identify objects and uses electromagnetic waves for transmitting and receiving information stored in a tag or transponder to or from a reader. It is used in logistics and transportation for product tracking and inventory systems and their management. (Rida, Yang et al., 2010, p. 18-19)

Germain and Droge (1995) describe EDI as a “technology used to exchange information and data across organizations” and Holland et al. (1992, p. 539) define it as, “business to business transfer of repetitive business processes involving direct routing of information from one computer to another without human interference, according to predefined information

25 formats and rules”. (cited in Hazen & Byrd, 2012, p. 13)

Regarding the use of social media within logistics, Hazen & Byrd (2012) did not come up with specific opportunities of utilizing social media. Our review of literature also indicates a lack of research on social media use in logistics activities. However, a study by Simmet (2011) entails an online survey with a participation of 397 persons from the logistics industry, as well as executive consultants, representatives of science and research. (Simmet, 2011, p. 2, own translation) Unfortunately, the study focuses on the general use of social media in logistics companies, rather than on task related opportunities. Therefore, the majority of 69.8% sees social media mainly as a tool to improve public relations. In addition, 42% also recognize the possibility to establish a real time communication in order to support the earlier mentioned information flow through the organization. (Simmet, 2011, p. 3, own translation)

2.3.6 OPERATIONS / PRODUCTION:

The second of the primary activities is operations, which are activities associated with transforming inputs into the final product form (Porter, 1998, p. 39). Hill and Jones (2010, p. 82) refer to it as production, which “is concerned with the creation of a good or service”. In order to differentiate the production of a good or a service, they call the creation of physical products, manufacturing. The production of services occurs, “when the service is delivered to the customer Furthermore, the authors mention the potential of lowering a company’s cost structure through the production function when the related activities are performed efficiently, as well as the possibility of performing production activities in a consistent way with high product quality, which leads to differentiation, higher value and lower costs. (Hill & Jones, 2010, p. 82)

Tian, Yin and Taylor (2001, p. 324) describe, that over the past decades a plethora of changes in the manufacturing industry occurred to suit the emerging competitive pressure. Especially concerned with these changes were the information technology, manufacturing automation and management information system. These advanced manufacturing technologies “rely heavily on various information techniques to achieve higher productivity, higher quality, and lower production costs”. (Tian, Yin & Taylor, 2001, p. 324) Furthermore, most advanced manufacturing strategies are “based on the concept of Internet-based virtual enterprise technology”, and focus on “better communications among various functional areas such as product design, engineering, and production, which may have been located geographically in different countries” (Tian, Yin and Taylor, 2001, p. 326). Song and Nagi

(1997), as well as Park and Favrel (1999) state, that Internet-based global manufacturing systems are concerned with providing cooperative design support, distributed manufacturing, engineering simulation of virtual manufacturing environments, remote control, and supply chain resource planning (quoted in Tian, Yin & Taylor, 2001. P. 326).

2.3.7 MARKETING AND SALES

The primary activity marketing & sales offers a broad spectrum of activities, as previously stated, associated with “providing a means by which buyers can purchase the product and inducing them to do so”. (Porter, 1998, p. 40) For the purpose of narrowing down this broad activity, subdivisions into discrete activities have to be undertaken. (Porter, 1998, p. 45) For this purpose, Weis (2009, p. 33) extended Porter’s value chain by breaking down marketing & sales into five underlying categories, as displayed below in figure 2.10.

Marketing & Sales

Advertising Products Promotion Presales Sales Aftersales Services Public Relations

Figure 2.10: Subdivision of Marketing & Sales activities Source: Adapted from Weis, 2009, p. 33, own translation

The three categories presales, sales and aftersales, can be described as a breakdown of the basic sales process. (Weis, 2009, p 522-523)

2.3.7.1 PRODUCTS AND SERVICES

Kotler and Armstrong (2012, p. 224) define a product as “anything that can be offered to a market for attention, acquisition or consumption that might satisfy a want or need” and furthermore point out that a product includes often not only the physical tangible object, but also services, events, persons, paces, organizations, ideas or a mixture of these. Services are specified as “a form of product that consists of activities, benefits, or satisfactions offered for sale that are essentially intangible and do not result in the ownership of anything”. (Kotler & Armstrong, 2012, p. 224)

Except for the two existing extremes pure tangible goods and pure services, most so-called marketing offerings contain a mixture of product characteristics and services, which is supposed to deliver value to customers. (Kotler & Armstrong, 2012, p. 224) In order to stay competitive and deliver value to customers, companies nowadays have to differentiate their offers and create customer experiences. For the purpose of creating this experience, offerings consist of three different layers, as shown in figure 2.11 below, the core customer value, which is the need satisfying or problem solving benefit, the actual product, which includes the product’s features, design, quality level, brand name and its packaging, as well as the third layer, which is the augmented product, comprising “additional consumer services and benefits”. (Kotler & Armstrong, 2012, p. 224-225)

Figure 2.11:Three Levels of a Product Source: Kotler & Armstrong, 2012, p. 226

Regarding Cyganski and Hass (2008, p. 108, own translation), social networks provide opportunities by utilizing them for the purpose of market observation by analyzing and monitoring contents. On the basis of these observations and the direct contact to customers, suggestions for improvements, trends and innovative developments can be recognized and realized faster and therefore allow a more customer focused development of products and services. (Cyganski & Hass, 2008, p. 108-109, own translation)

2.3.7.2 ADVERTISING, PROMOTION AND PUBLIC RELATIONS

The second subdivision, according to Weis (2009, p. 33), consists of advertising, promotion and public relations. These terms are often referred to as a part of a company’s total promotion mix or marketing communications mix, which is a toolbox for companies to “persuasively communicate customer value and build customer relationships”. (Kotler & Armstrong, 2012, p. 408) The promotion mix consists of five elements as displayed below in figure 2.12. While Czinkonta and Ronkainen (2007, p. 394) argue that the promotion mix implies advertising, personal selling, publicity, sales promotion and sponsorship, Kotler and

Armstrong (2012, p. 408) include direct marketing in exchange for sponsorship. Depending on the company, the type of product and the situation, the utilization, as well as the combination of these tools will differ. (Czinkota & Ronkainen, 2007, p. 394)

Advertising •Any paid form of nonpersonal presentation and pomrotion of ideas, goods, or services by an identified sponsor.

Sales promotion •Short-term incentives to encourage the purchase or sale of a product or service.

Personal selling •Personal presentation by the firm's sales force, for the purpose of making sales and building customer relationships.

Public relations •Building good relations with the company's various publics by obtaining favorable publicity, building up a good corporate image, and handling or headingoff unfavorable rumors, stories and events.

Direct marketing •Direct connections with carefully targeted individual consumers to both, obtain an immediate response and cultivate lasting customer relationships.

Figure 2.12: Elements of the promotion mix Source: Adapted from Kotler & Armstrong, 2012, p. 408

The promotional mix should be “coordinated according to target market and product characteristics, the size of promotional budget, the type and length of international involvement, and control considerations” and should not be used isolated or without interplay with other promotional tools. (Czinkota & Ronkainen, 2007, p. 394) According to Boone and Kurtz (2007, p. 488), “integrated marketing communications (IMC) attempt to coordinate and control the various elements of the promotional mix (…) to produce a unified customer- focused message and, therefore achieve various organizational objectives”. (cited in Mangold & Faulds, 2009, p. 357) Mangold and Faulds (2009, p. 359) determine two roles social media can take from a promotional perspective. The first role is consistent with the use of traditional IMC tools and allows companies to directly reach out to their target customers by utilizing their own or others individual social media, as for example blogs or social networks. (Mangold & Faulds, 2009, p. 357) The second role of social media is, regarding Mangold and Faulds (2009, p. 359), “unique” as “customers can use it to communicate with one another”, which can be described as “an extension of traditional word-of-mouth communication”. In addition, the uniqueness of this social media characteristic lies in “the magnitude of the communication” as customers are able to reach out to an enormous amount of people with only a few

29 keystrokes (Ibid.). Product and service related information based on consumers’ experience originates in the marketplace and is “carried on by consumers using social media”, while “managers’ control over the content, timing, and frequency is being severely eroded.” (Mangold & Faulds, 2009, p. 360) This “new communications paradigm”, clarifying this new way of marketing communications, was determined by Mangold and Faulds (2009) as displayed below in figure 2.13.

Figure 2.13: The new communications paradigm Source: Mangold & Faulds, 2009, p. 360

With the utilization of the model above, Mangold and Faulds (2009, p. 360-361) explain that marketing managers have to adapt to changes and accept four major changes. Firstly, a lot of information about products and services is being communicated among consumers. Secondly, their direct responses affect “all aspects of consumer behavior, from information acquisition to post-purchase expressions of satisfaction and dissatisfaction” (Ibid.). As a third major change, marketing managers have to face the situation, that consumers are more likely to neglect traditional promotional elements and rely less on classical advertising, for the purpose of gathering information. Finally, managers have to “learn to talk with their customers, as opposed to talking at them”. (Mangold & Faulds, 2009, p. 360)

Cyganski and Hass (2008, p. 108, own translation) state that the pure presence of employees in business networking platforms can “promote a dynamic, innovative image and represent a company in a community”. Furthermore, a company’s publicity or brand awareness can be strengthened by setting up “premium groups”, providing exclusive content to community members. (Ibid.)

2.3.7.3 PRESALES

The first phase in the basic sales process regarding Weis (2009, p. 523, own translation) is concerned with the recognition of customer needs and making contact with customers. Jobber and Lancaster (2009, p. 235–243) examined eight important factors, as more detailed described below in table 2.2, which have to be considered during the preparation phase for sales in order “to gain sales, to prospect for new customers, to maintain customer records and provide information feedback, to manage their work, to handle complaints and to provide service”. (Jobber & Lancaster, 2009, p. 243)

Table 2.2: Factors in the sales preparation Product knowledge and customer “Because people buy products for the benefits they confer, benefits successful salespeople relate product features to consumer benefits; product features are the means by which benefits are derived” Knowledge of competitors’ “It allows a salesperson to offset the strengths of those products and their benefits products, which may be mentioned by potential buyers, against their weaknesses.”

“In industrial selling, sales engineers may work with a buying organization in order to solve a technical problem. It is obviously to their benefit that the specification reflects the strengths and capabilities of their products rather than those of the competition.”

Sales presentation planning 1. salesperson remembers important consumer benefits 2. reinforce the benefits by using visual aids and demonstrations 3. builds confidence in the salesperson 4. preparation for arising questions or objections Setting sales and negotiation Sales objectives target at what the customer should do, for objectives example the customer should define clear requirements, try the product or visit the production site Understanding buyer behavior Gathering information about the target customers to understand their individual behavior Assessing the power balance The balance of power is determine by four factors:

1. Number of options available to each party 2. Quantity and quality of information held by each party 3. Need recognition and satisfaction 4. pressures on the parties Concession analysis “The aim of concession analysis is to ensure that nothing that has value to the buyer is given away freely during negotiations. A skillful negotiator will attempt to trade concession for concession so that ultimately an agreement that satisfies both parties is reached.” Proposal analysis Estimate proposals and demands buyers are likely to make and anticipate them to plan possible reactions and counter- proposals. Source: Concluded from Jobber & Lancaster, 2009, p. 235-243

2.3.7.4 SALES

The second phase of the process, namely sales, implies the submission of proposals and the sales conclusion. (Weis, 2009, p. 523, own translation) A business proposal is a “persuasive offer submitted for soliciting business.” (Mukherjee & Basu, 2005, p. 40) A business proposal to potential customers should fulfill the following criteria, according to Mukherjee and Basu (2005, p. 40):

 Concisely show what a company has to offer  Clearly specify how the customer will benefit  The company’s ability to deliver the service  Specify time schedules, costs, performance standards, personnel requirements, etc.  Conclude by urging the reader to act on the company’s proposal

Weis (2009, p. 524, own translation) clarifies that the sales conclusion, respectively the sale itself, can be distinguished in three basic categories: personal sales, semi personal sales and impersonal sales as displayed below in table 2.3.

Table 2.3: Different types of sales Personal sales Semi personal sales Impersonal sales  Brick and mortar store  Phone  E-Commerce  Trade fair  Inbound  Fax  Party  Outbound  Vending machine  Peddling  Videoconference  Internet  Teleshopping  Direct Mailing  Mail order selling Source: Weis, 2009, p. 524, own translation

2.3.7.5 AFTERSALES

The final phase in Weis’ (2009, p. 523, own translation) basic sales process consists of the fulfillment, as well as subsequently aftersales services. A company has to consider two major tasks during the fulfillment, which are the monitoring of the fulfillment and the processing of complaints. (Ibid.)

Aftersales services and its marketing exceed the pure sale of a product for the purpose of creating customer satisfaction. (Weis, 2009, p. 39-40, own translation) The most important tools, following Weis (2009, p.40, own translation), can be differentiated regarding technical, as well as economic characteristics and are displayed below in table 2.4.

Table 2.4: Aftersales services Technical Economic  Fulfillment  Information  Installation  Customer retention programs  Maintenance  Loyalty cards  Service contracts  Complaints management  Spare parts service  Contacts  Repair  Acts of goodwill  Customer training  Operating instructions  Product recall  Recycling  Disposal Source: Adapted from Weis, 2009, p. 40, own translation

Throughout the whole sales process, social media activities can take a supportive role. First of all, business networks provide the opportunity to keep in touch with business partners, similar as in the procurement. Additionally, networks can be used as sales channel, especially in a business-to-business industry concerned with low structured, individually customized products and services. Potential customers and consumers can be contacted for the purpose of initiating sales, but also for the purpose of future collaboration. (Cyganski & Hass, 2008, p. 109, own translation)

2.3.8 SERVICE

The last part of the primary activities is service, regarding Porter’s generic value chain, as stated earlier, and was defined as “activities associated with providing service to enhance or maintain the value of the product, such as installation, repair, training, parts supply, and product adjustment.” (Porter, 1998, p. 40)

The whole service activity went through a fast changing development over the last years. The description of service by Porter is the basic definition and suits to the earlier product focus of companies, where marketing the product itself was most important. But this orientation shifted in the recent time to a customer focus, where it became more important “to satisfy or exceed customer requirements over a long horizon of the relationship” (Fjermestad, Romano JR., 2006, p. viii) Therefore, service is nowadays often referred to as customer

34 relationship management (CRM) and is defined by Fjermestad and Romano JR. (2006, p. viii) as “a business strategy to acquire and manage relationships with customers in order to maximize the long-term value of these relationships with the aim to increase the loyalty of profitable customers and to increase the profitability of loyal customers”. This shifted orientation and the appeal of CRM have come from an increased and ongoing competition, which has been noticed by companies in all fields and of all sizes (Raab et al., 2008, p. 6). The authors explain this shift because of an increasingly sated market, replaceable products with ever shorter product cycles, constantly changing and ever higher customer standards and expectations as to quality, price, reliable service, as well as expectations regarding the market transparence via improved access to relevant information.” (Raab et al., 2008, p. 6)

The next development of CRM is called electronic customer relationship management (eCRM), which is basically still the same but “accomplishes the same processes of traditional CRM with the benefit of electronically gathered information in a way to tailor the service level specific to each customer”. (Fjermestad, Romano JR., 2006, p. 23)

According to Raab et al. (2008, p. 6-7), the goal of CRM is “the management of durable and profitable customer relationships”, where durable means building up customer trust, aiming at high customer regularity and cultivating life-long relationships. Relationship indicates that the company should orient itself more around the customer, whereas profitable entails that during the course of the customer relationship, every customer’s contribution to the company profit will be maximized. And management finally describes the capacity to coordinate and further develop across all organizational borders, all interactions with current and potential customers. (Ibid.) In addition, the authors summarized the individual processes and stages of CRM in a model, which can be seen in figure 2.14 below and are explained subsequently.

Figure 2.14: Process and stages of CRM Source: Raab et al., 2008, p. 11

Customer Orientation: The entirety of a company’s thought and action should be focused on the customer’s current and potential needs, wishes and problems. To that end, it is important to have exact knowledge of markets, products, competition and of course the customer.

Quality of Product and Service Performance: An important factor for the success of a company derives from the quality of its products and services in relation to the competition. It is advantageous to incorporate the wants of the customer into the product in the design stage. Instead of finding customers for the product, the idea is to find products for the customer. The cost to benefit ratio is here definitely a factor to take into consideration.

Customer Satisfaction: After the consuming or use of a product, the customers will ask themselves if they were happy with the product. If the answer is yes, they will tend to rebuy the product when they shop again, recommend it to others and probably become a regular customer.

Customer Retention: The key to building up a regular clientele is obtaining satisfied customers. Companies, which succeed in precisely adapting their spectrum of performance to the ideas and expectations of their customers or who even manages to surpass them, generate satisfaction and thus create a basis for future business.

Customer Value and Company Success There is a close relationship between customer commitment and profit level. The profit per customer increases with the growing duration of customer’s relationship to a company

As mentioned earlier in the problem discussion, the top priority (88%) for CEOs is to get closer to their customers (Capitalizing on Complexity, 2010, p. 39), which aligns with the premise of customer orientation to have exact knowledge about them. Corresponding to Greenberg (2010, p. 410), the type of information changed over the years from customer transactions, where the goal was to upsell or cross-sell as much as possible, to an adoption of customer interactions, where the focus is on the conversation, in order to obtain better information for deeper customer insights. As reasons for this transformation he mentions social networks as key reflection, which derives from the fact that sharing knowledge became easier and less expensive because of the commonly available internet access and simplified uploading of information. (Ibid.)

In order to achieve closer customer contact, companies need to be present where their customers are, and regarding the earlier mentioned growing Internet adoption in general and numbers about the development of social media, respectively social networking sites, this is their new, virtual hub (Baird & Parasnis, 2011a, p. 30). That is why it is important for companies to embrace this shift and further develop CRM with a new strategy called social CRM. The goal of this strategy is to facilitate collaborative experiences and the dialogue with customers, which they value, instead of just managing customers. (Ibid.)

In order to get closer to the customer, it is crucial to “be clear on the differences between social media and other channels”, since social CRM concerns enabling engagement with the customer for the mutual benefit of both, customer and the business. (Baird & Parasnis, 2011a, p. 36) Furthermore, it is vital to “make the customer experience seamless – across social media and other channels”, meaning that social media activities should not be isolated, but need to be thoughtfully integrated and match with other customer-facing initiatives (Ibid.). Finally, Baird and Parasnis (2011a, p. 36) mention that the dialogue with customers and the exchange of information is the biggest potential of social media, because “dialogue and participation is what social media is all about”. Regarding the information, it is especially the personal one, like “their movie and literary interests, their hobbies, their ‘style’ likes and dislikes”, that becomes essential in order to gain deeper customer insights. This information is available at individual profiles from social networks, such as Facebook or LinkedIn for example, and there are several tools in the market to obtain it. (Greenberg, 2010, p. 416)

Another opportunity to gain further customer insight is the so-called actionable knowledge, which was traditionally done by offering compensation in form of coupons or discounts in exchange for customer information through surveys or similar activities. But through social networks and communities this information becomes publicly and freely available and very valuable to organizations, because it provides the result of actions and new insights into best practices often in real time. (Greenberg, 2010, p. 416)

Greenberg (2010, p. 416) mentions two practical examples how to use such communities to illustrate this opportunity. One is from Helpstream, a vendor that provides a community focused customer service product, which found out in a study of their customers that the community directly solved 17% of all customer issues. The second example is about “outcome based communities”, which are single purpose communities with a foreseeable end. It is called MyStarbucksIdea, which is a community for Starbucks customers with the goal to find out what products they would like to see. Any registered member of the

37 community is able to suggest a product or service idea for free and the others can vote on them. The best idea with the most votes becomes part of the Starbucks product line. Hence, customers benefit from a series of new products that they desire and Starbucks itself benefits from customer participation and insight in creating their products at very low cost. (Greenberg, 2010, p. 416)

2.4 CHALLENGES AND STRATEGIES

Although, the usage of social media entails a lot of benefits, there are also numerous challenges for the implementation and execution of such activities, which have to be considered in order to exploit this potential successfully. Therefore, some of the top challenges mentioned by Baird and Parasnis (2011b, p. 9), as well as further threats discovered in the reviewed literature, will be described subsequently in more detail, including possible strategies to deal with them.

2.4.1 MEASURING ROI

According to Baird and Parasnis (2011b, p. 9), establishing a ROI strategy is the major challenge for companies while introducing a social media strategy. They describe the importance of this challenge with the little consensus about what to measure and the methodology to use, because “the ROI consensus is that there is no consensus” (Ibid.). The authors surveyed several CEOs and their answers what to measure varied extremely. Some say it is easier to measure social media than other areas, because it is digital, and observe the percent of those on the platforms they engage, in order to check the appropriateness of the provided content. Another respondent mentioned that there are several ways to measure the likes of sentiment, page views and engagement levels, but that it is difficult to scale the value. (Baird & Parasnis, 2011b, p. 10)

2.4.2 CONTENT / CONTROL

As revealed in the updated communication model, a vital part of social media is the interpersonal communication between the customers themselves. Social network pages, as well as premium groups are mainly initiated by the customers and not the company. (Cyganski & Hass, 2008, p. 115, own translation) The content, which is published in social media “cannot be controlled in advance” and “cannot be managed in the same way as, for example conventional media such as TV or newspapers”. (Aula, 2010, p. 44) Therefore, companies are most often very limited concerning controlling and influencing the created content about themselves, (Cyganski & Hass, 2008, p. 115, own translation) (Aula, 2010, p. 44) resulting in a fear of negative brand exposure, often referred to as “reputation risk” (Aula, 2010, p. 45), which is a major concern for companies. This fear derives from the loss of control over the relationship, because “the customers and the highly influential virtual networks are now driving the conversation.” (Baird & Parasnis, 2011a, p. 30) Users of social media, especially in public accessible social networks, generate unverified information, which can be true or false, and “put forth ideas about organizations that can differ greatly from what organizations share with the public”, meaning that the created image of the company by the users varies greatly from “the organization’s own idea of what it is or where it wants to be” (Aula, 2010, p. 45). Greenberg (2010, p. 411) agrees with this statement and explains the empowerment of customers with greater selection choices, instantaneous access to knowledge, available through third-party sources, and especially peer trust, resulting in the fact that customers “don’t have to rely on particular manufacturer, distributor or retailer for information on a product or service offered.”

Aula (2010, p. 47) states that for applying strategic decision in order to manage reputation risks a understanding of the concept of “ambient publicity” is needed, which extends a company’s market environment with a communicative environment of meaning in which images, symbols, stories, myths, and rumors both fabricate and challenge the organization’s reputation. Regarding this concept, reputation is determined by the environment of meaning, organizations, stakeholders and the public, which form an “ubiquitous communication and media sphere”, making it difficult to distinguish different media, content and content producing participants. (Aula, 2010, p. 47)

Based on the concept of “ambient publicity”, Aula (2010, p. 48) came up with four strategies to deal with reputation risk in this context, as displayed in figure 2.16 below.

Strategy of absence

•Leaders make a strategic choice not to proactively attend conversations and content production about the firm in the context of ambient publicity. The flow of information is mainly unidirectional from an organization to stakeholders.

Strategy of presence

•Leaders encourage the firm to be attuned to the ambient publicity about itself. However, reputation management is based on conventional public relations, where a company aims to inform specific audiences via certain media channels. Specific media, such as newspapers, are used to reach the intended audiences. The mode of reputational communication is more monolog than dialog.

Strategy of attendance

• Leaders encourage the firm to take part in social media conversations as a listener, but also to collect, share and consider information internally, whenever the subject concerns the company or is important to the industry. Firms’ reputation management consists of attending, but its awareness of the ongoing dialog among stakeholders is highly valued.

Strategy of omnipresence

• Leaders are closely involved in ambient publicity. Firms accept the blurred boundaries between privacy and publicity, and stakeholders and media. Reputation management follows the idea of ‘‘multilogging’’ compared to dialoging: interaction with the public is complex, overlapping, and continuous. Because reputation risks can emerge anywhere within ambient publicity, firms should be omnipresent."

Figure 2.15: Ambient publicity Strategies Source: Adapted from Aula, 2010, p. 48

2.4.3 COMMITMENT

Another very important aspect which has to be considered to be able to take advantage of social media is the commitment of employees and the management to participate actively in social media and especially in business and social networks by creating content, discussing and establishing contacts (Cyganski & Hass, 2008, p. 115, own translation). McAfee (2006,

40 p. 27) claims that most people who use the Internet and its features, do not help to “produce the platforms”, rather they only use it and therefore do not create content. The challenge appears in monitoring employees’ use of social media, because on the one hand there is the fear of “an inadvertent employee gaff or intentional viral sabotage”. On the other hand, companies are not able to control employees’ daily use of social media, in the same way they cannot control every phone call, conversation or e-mail. (Baird & Parasnis, 2011b, p. 12) In order to successfully execute social media activities, employees must be willing to participate in this new way of communication and the management has to ensure, that the “commitment of employees is supported and considered as a part of their work”. (Cyganski & Hass, 2008, p. 115, own translation)

2.4.4 INFORMATION OVERLOAD

Especially regarding social networks, a side effect of Metcalfe’s law applies (Cyganski & Hass, 2008, p. 115, own translation). Developed by Bob Metcalfe in the early 1980s, the law has been used to elucidate the development of many technologies ranging from phones, cell phones, and faxes to web applications and social networks. Metcalfe’s law clarifies the network effect, which describes an increase and enormous growth in value, “as the network grows, the connectivity increases, and if people can link to each other’s content”. (Hendler & Golbeck, 2008, p. 14) The increasing number of users and the consequent increase of content might lead to an “information overload”. Órrin Klapp points out that “a large amount and high rate of information act like noise when they reach overload: a rate too high for the receiver to process efficiently without distraction, stress, increasing errors and other costs making information poorer”. (quoted in Edmuns & Morris, 2000, p. 19) This information overload can cause time-consuming search requests and even harder controlling from an organizational perspective. (Cyganski & Hass, 2008, p. 114, own translation)

2.4.5 HEADHUNTING

The opportunity of headhunting employees from other companies, as previously described in the human resource management section, can also be perceived as a risk. A company’s employee, who is actively engaged in business networks, can at any time be targeted by other companies’ headhunters and be lured away. (Cyganski & Hass, 2008, p. 115, own translation)

2.4.6 COMPETITION

Regarding Lochmeier (2007), the often publicized idea and knowledge exchange in knowledge intensive activities (f.e. research and development) has to be looked at critically, as company internal rivalries might exist and therefore no free exchange occurs. (quoted in Cyganski & Hass, 2008, p. 115, own translation)

2.4.7 DATA SECURITY

In most cases, “an employee must be able to access the most up-to-date information that he or she may have been working on, and more importantly should have immediate access to colleagues” and therefore they must be able to access their internal data and accounts from work, as well as from home. (Leiby & Konkol, 1996, p. 129) For this purpose, the user has to send some form of user authentication, which might be opposed to Internet criminality. (Leiby & Konkol, 1996, p.129) According to Steve Hawkins, David C. Yen and David C. Chou (2000, p. 142) “people continue to use the Internet as a means for their own gain, stealing the information and data from one company and making it their own”. Internet attacks can be either active attacks, when “the intruder engages in tampering with the information being exchanged”, or passive attacks, when “the intruder merely observes the information passing through the channel without interfering with its flow or content” and can furthermore be categorized into four major types of threats as displayed in figure 2.17 below. (Jung, Han & Lee, 2001, p. 489)

1. Interruption

•an asset of the system is destroyed or becomes unavailable

2. Interception

•an unauthorized party gains access to an asset

3. Modification

•the content of a data transmission is altered and results in an unauthorized action or result

4. Fabrication

•an unauthorized party inserts counterfeit objects into the system

Figure 2.16: Four major threats to Internet security Source: Adapted from Jung, Han & Lee, 2001, p. 489

In order to deal with these threats, a huge variety of technological security solutions have been developed, including virtual private networks, digital certificates, data encryption and network operating systems. Furthermore, it is important that “corporate officials spend the time to educate themselves in IT” and “require their staff to stay abreast of innovations and new trends in the IT field”, as technology used today might be out dated soon. (Hawkins et al., 2000, p. 142-143) That is why the best protection from unauthorized access to a company’s data is “constantly keep watching for intrusion and to employ the best protection”, which can be afforded. (Hawkins et al., 2000, p. 131)

3 FRAME OF REFERENCE

Based on the previously presented theories and literature in Chapter 2, a conceptual model has been elaborated, implying the different types of social media and the different tasks they are able to fulfill within the activities of Porter’s value chain by taking possible arising challenges and occurring risks into consideration.

Social Virtual social Collaborative Content Virtual game RQ 1 Blogs networking Sites worlds projects communities worlds •Blogspot •Facebook •Second Life •Wikipedia •YouTube •World of •Wordpress •Xing •PS3 Home •MyVideo Warcraft •Twitter •LinkedIn •SevenLoad •MySpace •Flickr

CHALLENGES & RISKS RQ 3 • Loss of control RQ 4 • Reputation risk • Insufficient commitment • Information overload • Headhunting • Internal Competition • ROI Measurement

FIRM HUMAN RESOURCE TECHNOLOGY PROCUREMENT RQ 2 INFRASTRUCTURE MANAGEMENT DEVELOPMENT

 Simplify / Improve  General  General  General knowledge and communication communication communication information exchange  Recruitment and  Initiation of Evaluation  Information gathering  Information gathering cooperation through mutual contacting,  “Onboarding”  Collaboration  Keep-in-touch with specific searches, previous suppliers information sharing  Task allocation

Support Activities Support  Concept/Product  Alumni testing  Maintain current relationships  Training and

development support

IN-/OUTBOUND OPERATIONS MARKETING & SERVICE LOGISTICS SALES

 Support general  Information  Product:  Customer engagement information flow management for higher More customer focused productivity, quality and development, trend  Direct dialogue lower costs recognition  Promotion: Activities  More customer insight  Improve Directly reach out to communication for audience, promote remote control and word-of-mouth resource planning  Sales:

Primary Primary Keep-in-touch with partners, sales channels, initiation of sales or future collaboration

The application of the above constructed conceptual model will provide a better understanding of the social media usage regarding Porter’s value chain activities and will furthermore help to answer the previously elaborated research questions, as once again resumed in table 3.1 below.

Table 3.1: Research Questions Research Problem: “How do social media influence companies’ activities along their value chain?” RQ 1: What types of social media do companies use in different value chain activities? RQ 2: How can the perceived benefits of using social media for companies be described? RQ 3: How can the challenges, faced by companies using social media, be characterized? RQ 4: How can the companies’ strategies to deal with these challenges be described?

The crux of this model is Porter’s value chain and its activities linked to the different opportunities social media can provide for companies. These opportunities and functions are referred to as perceived benefits for organizations. Depending on the different types of used social media, risks and challenges may occur and strategies to overcome, respectively deal with them become indispensable to capitalize on social media. The different types of social media in regard to Kaplan’s classification will be the guideline for RQ 1. Considering the previously stated risks and challenges the basis for RQ 3 and RQ 4 will be given. By taking a closer look at the companies’ functional application of social media within all activities of the value chain, RQ 2 will be processed and possible opportunities be revealed.

4 METHODOLOGY

The following chapter of this thesis will provide information about the conducted research methods, for the purpose of finding a solution to the previously in Chapter 1 defined research problem. The methodology will describe how the necessary data will be collected and analyzed.

According to Saunders, Lewis and Thornhill (2009, p. 5) research can be defined as “something that people undertake in order to find out things in a systematic way, thereby increasing their knowledge.” The authors came to this definition by describing three necessary characteristics that include the systematically collection and interpretation of data, as well as the clear purpose of the research. Regarding Ghauri and Grønhaug (2005), the systematic aspect focuses on logical relationships instead of just beliefs. Furthermore, they argue that there are several ways “to find out things” including describing, explaining, understanding, criticizing and analyzing (cited in Saunders et al., 2009, p. 5).

In order to conduct this study, we followed the process as shown in figure 4.1, which will be further described subsequently. It will be the general plan of how the research questions will be answered and contain clear objectives based on them. Each step depends and builds on the previous one and the quality of the whole research will be determined by its validity and reliability.

Research Purpose

Research Approach

Research Strategy

Sample selection Quality Standards: Quality

Validity & Reliability & Validity Data Collection

Analysis of Results

Figure 4.1: The research process

4.1 RESEARCH PURPOSE

The research purpose begins with the formulation of the research idea and the description why it is necessary or interesting to conduct this specific study, what took place earlier in the problem discussion in chapter 1 with the definition of our research problem.

How do social media influence companies’ activities along their value chain?

This is followed by the definition of the research questions, which are supposed to answer this problem and reach the research objectives. Within this step we have already begun to think about the purpose of the research. (Saunders et al., 2009, p. 138) According to Saunders et al. (2009, p. 139), the classification of the research purpose can be described in three different ways, as exploratory, descriptive or explanatory. Furthermore, a research project can have more than one purpose and even change over time. (Saunders et al., 2009, p. 139)

An explanatory study is usually applied to study “a problem or situation in order to explain the relationships between variables”. In addition, the authors suggest using this type of studies when submitting quantitative data to statistical test correlations to obtain a more detailed view of the relationship. (Saunders et al., 2009, p. 140-141)

Robson (2002) describes the goal of a descriptive research “to portray an accurate profile of persons, events or situations” (quoted in Saunders et al., 2009, p. 140). Saunders et al. (2009, p. 140) mention that it is important to have certain knowledge about the phenomena someone wants to study, before collecting data. They further argue that the problem of a descriptive research is, that it describes something but no conclusions can be drawn. Therefore, they add that it is often used as a forerunner or an extension to a piece of exploratory or explanatory research.

The third classification is, according to Robson (2002), the exploratory research and entails the different studies of “what is happening, to seek new insights, to ask questions and to assess phenomena in a new light”. (quoted in Saunders et al., 2009, p.139). Saunders et al. (2009, p. 140) recommend exploratory studies for getting an understanding of a problem and name the three principals of conducting such a research, which are the search of literature, interviewing experts in the subject and conducting focus group interviews.

They further mention the advantages of flexibility and adaptability to change in case of new data appearances or new insights that might occur during the research. This indicates that the topic of the project begins to be broad and becomes progressively narrower as the research develops to focus on the main objectives. (Saunders et al., 2009, p.130)

Regarding the description of the different research purposes, this study will contain elements from an explorative and descriptive study. The main purpose of this project is to gain more knowledge about how companies use social media in the different business activities. Therefore, a literature review has been done earlier, as well as interviews with companies will be conducted. Due to these facts, this thesis will be an exploratory study. Furthermore, the research about the use of social media activities in regard to specific business activities is relatively recent and therefore, another purpose of this study is to provide a description of this new phenomenon.

4.2 RESEARCH APPROACH

According to Saunders et al. (2009, p. 124), each research project involves the use of theory, which can be approached in two different ways. The options are known as inductive and deductive and differ from the fact, whether the theory has already been elaborated or not. This influences the choice of research strategy in the beginning. The deductive approach entails the gathering of existing theories and developing hypotheses, which will be followed by a rigorous test. In contrast to this, the theory of an inductive approach derives solely from the analysis and interpretation of empirical collected data.

In this study, we will gather and use existing theories and combine them as shown in the previously conceptualized frame of reference, resulting in a deductive approach. Based on this described model we will carry out an empirical study, which will be analyzed subsequently, enabling the drawing of conclusions.

Regarding an empirical study, a collection of data is necessary. Saunders et al. (2009, p. 151) mention two techniques of collecting data and analyses procedures. One technique is the quantitative method, which is usually used to generate and analyze “numerical data such as numbers”. The second technique is the qualitative method that generates “non-numerical data like words, pictures or video clips”.

This research will entail the collection and analysis of qualitative data in order to get a deeper knowledge of the topic. Therefore, the data will derive from the words, definitions and explanations given by the respondents.

4.3 RESEARCH STRATEGY

As mentioned earlier, the research strategy stands for the general plan how the research questions will be answered. (Saunders et al., 2009, p. 136) According to Yin (2009, p. 8) the most important research strategies are experiment, survey, archival analysis, histories and case studies, whereas Saunders et al. (2009, p. 141) add action research and grounded theory. They further state that each strategy can be used for the three different research purposes exploratory, descriptive, as well as explanatory and that different strategies can be combined.

For the purpose of determining the appropriate usage of each method, Yin (2009, p. 8) came up with three conditions to support the decision, which are:

 The type of research question posed  The extent of control an investigator has over actual behavioral events  The degree of focus on contemporary as opposed to historical events

Table 4.1 below summarizes and describes the relation of these conditions to the five major research strategies from Yin.

Table 4.1: Relevant Situations for Different Research Methods Focuses on Form of Research Requires control of contemporary Question behavioral events? events?

Experiment How, why? Yes Yes

Who, what, where, how Survey No Yes many, how much? Who, what, where, how Archival Survey No Yes / No many, how much?

History How, why? No No

Case Study How, why? No Yes

Source: Yin, 2009, p.8

In this study, the research problem and questions include how companies are using social media, and with more detailed questions during the data collection, the reason why they are using it will be investigated. Furthermore, the control of behavioral events is not required, but it focuses on contemporary events, because social media is one of the promising new developments for business opportunities. Taking these facts into consideration and comparing them with the table 4.1 above, this research meets the conditions for a case study.

According to Yin (2009, p. 18), a case study can be defined as “an empirical inquiry that investigates a contemporary phenomenon within its real-life context, especially when the boundaries between phenomenon and context are not evident”. Concerning this research, the investigated phenomenon displays the social media use of companies and will be examined in its real-life context. Yin (2012, p. 8) further mentions four different case study strategies based on two discrete dimensions, which are namely single vs. multi case and holistic vs. embedded case. A single case is often used to represent a critical, extreme or unique case, whereas a multiple case study covers multiple cases and allows drawing a single set of cross-case conclusions. The second dimension, holistic vs. embedded refers to the unit of analysis, where a holistic case considers for example a whole organization but an embedded case analyzes different groups within one organization. The various case study designs are visualized in figure 4.2 below.

Figure 4.2: Basic Types of Designs for Case Studies Source: Yin, 2012, p. 8

Regarding figure 4.2, this study will use a holistic multiple case design in order to enable a comparison between companies and consequently provide a deeper understanding of the current situation of companies’ social media usage.

4.4 SAMPLE SELECTION

Collecting data from a full set of relevant cases, referred to as population, is possible for some research questions. As the case may be, that it is impracticable to survey the entire population, time or budget constraints exist or results are needed quickly, a sample selection is suggested. (Saunders et al., 2009, p. 212) Hereby the amount of data collected will be reduced by “considering only data from a sub-group rather than all possible cases or elements”, making it possible to collect more detailed information. (Saunders et al., p. 210)

Saunders et al. (2009, p. 213) clarify two research methods: probability or representative sampling and non-probability or judgmental sampling. In the case of probability sampling, the probability of each case being selected is known and most likely equal, what provides the opportunity to answer research questions and to achieve objectives on statistical behalf. In contrast, non-probability sampling deals with an unknown probability in regard to the sample selection and therefore no conclusions on statistical grounds can be drawn. Non-probability sampling is based on subjective judgment and recommended especially in exploratory stages, but can also be applied in other business or management research projects, as it provides “an information-rich case study in which you explore your research question and gain theoretical insights”. (Saunders et al., 2009, p. 233) Regarding Jensen (2012, p. 243), the sample selection is often determined by availability, convenience, access and participation. Depending on the sample selection method, different sampling techniques exist as displayed in figure 4.3 below.

Figure 4.3: Sampling techniques Source: Saunders et al., 2009, p. 213

For the purpose of gathering information regarding this exploratory study, a non-probability sampling will be conducted, with a purposive sample selection, as this implies the opportunity to select cases, which are most suitable to answer the research questions and to meet objectives. (Saunders et al., 2009, p. 237)

A purposive sample is taken, when “respondents are selected according to a specific criterion”. (Jensen, 2012, p. 245) Saunders et al. (2009, p. 239-240) point out five common purposive sampling strategies: extreme case, heterogeneous, homogeneous, critical case and typical case sampling, as more detailed described in table 4.2 below.

Table 4.2: Purposive sampling strategies Focus on unusual or special cases in order to collect data about Extreme case sampling unusual or extreme outcomes Collect data to describe and explain observable key themes from a Heterogeneous sampling small sample with completely different cases, in order to reveal uniqueness and similar patterns.

Homogeneous sampling Focus on particular sub-group with similar cases only

Selection on the basis that cases can make a point dramatically or Critical case sampling are important

Usually used to provide an illustrative profile using a representative Typical case sampling case and to determine typical patterns Source: Adapted from Saunders et al., 2009, p. 239-240

In the case of this study, a typical case sampling strategy will be utilized, to reveal typical patterns regarding the organizational use of social media.

The criteria for the sample selection in this study are:

 Multinational enterprise  More than 100 employees  An established online presence

4.5 DATA COLLECTION

As a subsequent step during the research process, data has to be gathered in order to answer the previously developed research questions and to meet the objectives. Data can be separated into two major categories, namely primary data and secondary data. While primary data denominates the gathering of new data, secondary data refers to already existing raw data or published summaries, and is a powerful source of information, especially for reanalyzing data. (Saunders et al., 2009, p. 256) Saunders et al. (2009, p. 258-259) categorize secondary data in three different forms, namely documentary, multiple source and survey secondary data. It can be used in combination with primary data in order to “provide your main data set, longitudinal (time-series) data, area-based data or to compare with, or set in context with own findings”. (Saunders et al., 2009, p. 280)

Yin (2009, p. 99) elaborates six different ways to collect data in case studies: documentation, archival records, interviews, direct observation, participant-observation and physical artifacts. He recommends using these different techniques not isolated, but complementary, as “any case study finding or conclusion is likely to be more convincing and accurate if it is based on several different sources of information”. (Yin, 2009, p. 116) As for this exploratory study primary data has to be collected, interviews, as well as observation will be used.

According to Saunders et al. (2009, p. 288), observation involves “the systematic observation, recording, description, analysis and interpretation of people’s behavior” and can take two different forms, participant observation and structured observation. While participant observation is qualitative and concerned with “discovering the meanings that people attach to their actions”, structured observation is quantitative and focuses on the frequency of the people’s action. (Saunders, et al., 2009, p. 288) In the case of this study, investigating the organizational utilization of social media, external visible appearances of companies will be observed in social networks and blogs, especially concerning marketing and promotional activities, as well as recruiting.

Kahn and Cannel (1957) defined an interview as a purposeful discussion between two or more people (as cited in Saunders et al., 2009, p. 318). Interviews can be distinguished in terms of formality and structure and can be categorized in three different types: structured, semi-structured and unstructured or in-depth interview, as described in more detail in table 4.3 below. (Saunders et al., 2009, p. 320)

Table 4.3: Types of interviews  Questionnaires based on predetermined, standardized set of questions Structured interviews  Predefined question order  Quantitative  Non-standardized, context dependent set of questions  Question order may vary Semi-structured interviews  Additional questions may be required  Qualitative  No predetermined set of questions Unstructured interviews  Interviewee is supposed to speak freely Source: Concluded from Saunders et al, 2009, p. 320-321

As for this study a lot of questions and aspects are depending on the companies’ individual action and behavior, a semi-structured interview will be conducted, following an interview guideline, as it can be seen in appendix I. The order of questions might vary, depending on the respondents’ utilization of social media and perception of risks and challenges that is why no standardized interview can be applied. The choice of a semi-structured interview, furthermore grants the opportunity to investigate more in-depth details concerning specific aspects by conceiving additional questions, if it is necessary.

4.6 DATA ANALYSIS

Data analysis is the final step of the research process and is needed, so that the collected data becomes useful and understandable. (Saunders et al., 2009, p. 480) The first phase of analyzing data is to prepare it in order to facilitate the analysis process. Since this study will collect qualitative data from interviews, these interviews need to be transcribed, which means that the recorded actual words have to be reproduced into written statements. (Saunders et al., 2009, p. 480) Kvale (1996) points out that data analysis is an interrelated and interactive set of processes with the data collection, as it occurs during and after the collection of data. (cited in Saunders et al., 2009, p. 488)

Derived from the research approach, there exist also deductively and inductively based analytical procedures. The deductive analysis uses a framework, which is established before the data collection and the inductive analysis begins the research without a predetermined theoretical or descriptive framework. (Saunders et al., 2009, p. 489) The authors suggest using the same analytical procedure like the research approach, but also mention that some procedures often combine both, deductive and inductive, methods and can therefore be used for either one of the approaches. (Saunders et al., 2009, p. 502)

One of these combined analysis procedures is the data and display analysis which is based on the work of Miles and Huberman and will be used for this study. They define analysis as consisting of the concurrent flow of activities, which are data reduction, data display and conclusion drawing/verification. (Miles & Huberman, 1994, p. 10)

According to the authors, data reduction refers to the process of selecting, focusing, simplifying, abstracting and transforming the collected data from the interviews. They add that data reduction occurs at any stage of the study like establishing the conceptual framework, writing summaries, during the analysis and other organizational procedures until the report is finished. (Miles & Huberman, 1994, p. 10)

The following step is the so-called data display, which is “an organized, compressed assembly of information that permits conclusion drawing and action”. (Miles & Huberman, 1994, p. 11) The authors point out that long texts can stress the ability to process and understand information so that graphical displays of information improve the quality and validity of qualitative analysis. They further found out that displays like matrices, graphs, charts and networks are designed to assemble organized information into a compact form that makes it immediately accessible to the reader. (Miles & Huberman, 1994, p. 11) For that reason, this study will use parts of the earlier described conceptual framework in order to display and summarize the gathered information gained from the interviews.

The final activity of Miles’ & Huberman’s analysis procedure is conclusion drawing and verification. They claim that this is the step where collected and presented data begins to become meaningful through noting regularities, patterns, explanations, possible configurations, causal flows or propositions. (Miles & Huberman, 1994, p. 11)

According to the authors, empirical data can be analyzed in a within-case or cross-case analysis. (Miles & Huberman, 1994, p. 90) (Miles & Huberman, 1994, p. 172) A within-case analysis entails a comparison of the earlier chosen theory and the gathered data, whereas a cross-case analysis compares different cases for similarities or differences.

In this study, a within-case analysis will be conducted first to provide preliminary conclusions about what is occurring in each case, as stated by Miles & Huberman (1994, p. 90). Afterwards, a cross-case analysis between the cases will be carried out in order to compare the cases and therefore deepen understanding and explanation of the problem. (Miles & Huberman, 1994, p. 173)

4.7 QUALITY STANDARDS

Considering the chosen method of collecting data by conducting semi-structured interviews, the two major aspects regarding data quality are reliability and validity. According to Easterby-Smith et al. (2008), reliability is concerned with whether alternative researchers would reveal similar information. (cited in Saunders et al., 2009, p. 326) This can be an issue, especially in qualitative data collection, as non-standardized research methods are not supposed to be repeatable since they describe the current situation at the time they were collected. (Marshal and Rossman, 1999, cited in Saunders et al., 2009, p. 327)

In order to overcome this and provide a better understanding to other researchers, Marshal and Rossman (1999) suggest that notes should be taken related to the “research design, reasons underpinning the choice of strategy and methods, and data obtained”, as this enables other researchers to reanalyze the collected data. (cited in Saunders et al., 2009, p. 328)

For the purpose of ensuring a certain degree of reliability, notes will be taken and the interview will be audio recorded by mutual agreement. Furthermore, the previously mentioned interview guide will be identically used in each case to steer the conversation in the right direction. The interviews will additionally be conducted by two persons and in three out of four cases in the interviewee’s mother tongue to decrease the degree of inconsistencies in the responses. The fourth interview will be conducted in English, as the respondent has an excellent command of it.

The second important aspect in regard to data quality is validity, which is “concerned with whether the findings are really about what they appear to be about”. (Saunders et al., 2009, p. 157) Jensen (2012, p. 241) states that validity can furthermore be distinguished in internal and external validity. While internal validity focuses on a design of a research project, which is not theoretical or methodological error-prone, external validity is concerned with the generalization of findings to other situations or groups of people, often referred to as generalizability. External validity is especially an issue, if the sample only implies a small number of organizations, as seldom generalizations can be made. (Saunders et al., 2009, p. 158) The intention and purpose of this study is to look at a small sample of companies and their usage of social media, which is why no generalizable implications will be drawn. In addition, semi-structured interviews will be conducted in order to be able to adjust the questions and provide additional information for the respondents if necessary, to ensure a topic related in-depth conversation.

A summary of the methodology of this research can be seen in figure 4.4 below.

- Descriptive Research Purpose - Exploratory

Research Approach - Deductive - Qualititave

Research Strategy - Case Study

- Non-probability Sample selection purposive

Quality Standards: Quality - Observation Validity & Reliability & Validity Data Collection - Semi-structured interview

- Within-case Analysis of Results - Cross-case

Figure 4.4:Quality standards for validity and reliability

5 DATA PRESENTATION

After the theoretical basis, as well as the methodology of this research had been determined in the previous chapters, the following Chapter 5 will present the data collected, ensuing from the earlier defined research methods. At the beginning of every case, the company, as well as the respective interviewee will be introduced. Subsequently, the data collected by observing visible social media appearances of the company will be presented, followed by the provided information from the interview concerning the research questions, extended by a future outlook.

5.1 CASE A: SONY MUSIC ENTERTAINMENT GERMANY GMBH

Sony Music Entertainment Germany GmbH (from now on referred to as Sony Music Germany) is a subdivision of Sony Music Entertainment, one of world’s leading music companies and is a wholly-owned subsidiary of Sony Corporation of America, which completely belongs to the Sony Corporation headquartered in Tokyo, Japan. Sony Music Germany is located in Munich and employs about 200 people. The company is managed by its CEO, Philip Ginthör and collaborates with creative artists and repertoire units on the German market. Sony Music Germany’s portfolio includes record labels like for example 105 Music, Ariola, Columbia Four Music, FOUR Music Productions, Sony Classical, RCA Records and Europa, as well as a broad range of national artists like Peter Maffay, Die Fantastischen Vier, Silbermond, Udo Jürgens and Die Happy. (Sony Music, s.a.)

We had the pleasure of conducting the interview with Mr. Oliver Lepges, who is the Director Online of Sony Music Germany’s Catalog & Concept Division, which consists of 20 employees. This division is concerned with second-releases and marketing of their artists’ music albums, as well as with the conception and development of compilation brands, mentionable among others Kuschel Rock, Hit Giganten, Smash! and Bravo Hits. Under the name of “nice price”, respectively “Freundschaftspreis” the Catalog & Concept Division distributes the mentioned second-releases physically, in forms of CDs and DVDs, and digitally as downloadable versions for a reasonable price. Furthermore, exclusive product offers for various customer groups are realized and managed by this division. (Sony Music, s.a.)

The interview took place on 10th May 2012 and was conducted via Skype for the purpose of discussing our topic and obtaining information related to our research questions.

5.1.1 DATA FROM OBSERVATION

By searching for social media activities of Sony Music Germany directed towards the public, company-operated accounts on the social networking site Facebook, as well as a micro- blogging account for Twitter were found. Additionally, it was recognized that the company provides a lot of music videos on content community sites with an audiovisual focus, as to mention YouTube, MyVideo.de, Sevenload and tape.tv. Specific searches on German online job markets, as to mention Monster.de and StepStone.de, resulted in job offerings, posted by Sony Music Germany. Moreover, company accounts on the professional social networking sites Xing and LinkedIn were found.

5.1.2 DATA FROM THE INTERVIEW

Oliver Lepges stated: “We are part of social media, as we make entertainment” and thereby refers to Sony Music Germany’s ongoing presence within social media from the beginning. He clarified his statement by describing the company’s engagement in Yahoo and MySpace more than five years ago, before Mr. Lepges even took the position as Director Online of the Concept & Catalog Division. From his point of view, it is inevitable to ignore social media nowadays, as it has become a general communication platform especially among younger generations and because of its continuous growth.

5.1.2.1 SOCIAL MEDIA USE OF COMPANIES IN DIFFERENT VALUE CHAIN ACTIVITIES

Sony Music Germany’s main effort concerning the social media usage occurs in their marketing activities. For the purpose of promoting their brands and artists, they make use of social networks like Facebook or MySpace and utilize Twitter, as well as content communities, especially in terms of video and music streaming, respectively sharing, as to mention for example YouTube, tape.tv MyVideo and Spotify. In addition to the mentioned promotional aspect of these streaming platforms, Sony Music Germany earns money on streamed content, either directly or indirectly by embedded advertisement. In order to facilitate the provision of content on the respective social media, tools are used to automate this process, as for example songs and videos can be uploaded automatically.

Furthermore, Mr. Lepges referred to a service or CRM aspect of social media by emphasizing on the opportunity for customers to evaluate and review their purchased

59 content on online stores, like Amazon or iTunes. Although the company does not directly base their product development on suggestions proposed by customers, the reviews are an important tool to quickly recognize and react on production failures.

In terms of human resource management, Sony Music Germany is actively present on online job portals, as well as on university career portals for recruitment purposes. Additionally, potential job offers are posted on Facebook and Twitter, directly linking to the company’s career section on their website, where current offers are presented more detailed.

Oliver Lepges mentioned the existence of an intranet page, including shout- and message boxes for internal communication. The Sony Corporation also has worldwide groups on business networks like LinkedIn and Xing, as well as Facebook networks. All of these mentioned opportunities in regard to exchanging information and knowledge are barley used, as Sony Music Germany is rather small and the facility offers several conference rooms and common areas to support the company’s efforts towards personal communication, making the need for a virtual space void.

5.1.2.2 PERCEIVED BENEFITS USING SOCIAL MEDIA FOR COMPANIES

Oliver Lepges pointed out that social media is no longer just a “trend”, due to the, over recent years rapidly grown, number of users and therefore possible customers. Social media and especially social network sites are nowadays the place where the target group “consumes, communicates and participates” and has become more important than traditional channels like the television to create awareness and the telephone to communicate. One major benefit of social media for Mr. Lepges lies in the possibility to reach out to millions of people in an easy and cost-efficient way.

This benefit becomes most notably obvious in regard to the promotion of Sony Music Germany’s artist and brand portfolio on social networking sites, particularly on Facebook these days. By posting news and providing audiovisual content, which can easily be shared, liked, commented and embedded or linked by others, the company pursues the objective of motivating and engaging users to spread the intended message and to make it go viral. Since Sony Music Germany provides entertainment products, often relying on emotional affection, Oliver Lepges emphasized the effectiveness of promoting them online by using social media. Furthermore, he clarified the importance of attracting opinion leaders, as they have a major influence on peer groups.

In addition, the benefit of social media being the place where the target group interacts can be recognized, concerning post-purchase evaluations and reviews. In particular, Mr. Lepges pointed out the opportunity of considering and analyzing negative feedback posted on online stores to detect functional or hardware related problems of products, as this bypasses the classical time-consuming communication chain, which interposes distributors.

Oliver Lepges claimed the measuring of marketing activities on social media as easy to handle, because these promotional efforts can be adjusted and adapted towards the basic AIDA principle. The awareness of users can be measured by the Cost-per-Mille (CPM) ratio, indicating how many people’s attention on a certain activity was gained. The ratio measuring the interest in a specific medium is called Cost-per-Click (CPC), gathered for example by counting clicks on a banner or link. The desire can be measured by the Cost-per-“Shop click” (CPS) ratio, indicating how many people visited an online shop like iTunes or Amazon. The actual number of purchases, referred to as action, can be measured by utilizing the Cost-per- Order (CPO) ratio.

The biggest advantage of utilizing social media for Sony Music Germany is the easy content provision and its monetization. News postings and especially audio, as well as video files can be scheduled and automatically uploaded, facilitating the entire digital distribution process. Due to the fact that Sony Music Germany earns money on nearly every streaming of their audiovisual content either directly or indirectly by embedding advertisement, social media can be considered as a major opportunity to reach out to many customers and increase the company’s revenue.

5.1.2.3 CHALLENGES FACED BY COMPANIES USING SOCIAL MEDIA

According to Mr. Lepges, Sony Music Germany has been facing several challenges while using and implementing social media in its organization. Social media is a fast changing environment with quickly occurring and passing trends. To exemplify this fact, he brought up the story of the rise and fall of MySpace over the last decade. In the past, MySpace was one of the most famous social networking sites, especially concerning bands and artists. It provided companies with a huge variety of features, like embedding content, linking to external stores, publishing band related information, as well as the opportunity to directly stream music. Impelled by the music industry, which provided the necessary content and invested a lot of time in this social network, MySpace became an indispensable marketing channel for companies like Sony Music Germany. After the launch of Facebook, MySpace

61 lost its predominant position and basically vanished over the last years, accompanied by the previously much courted user base, including their data. This made the earlier efforts of companies to attract these users obsolete and forced them to start all over again on Facebook. The fast changing social media environment makes it also hard to integrate administrative functions, as structures might change and new applications might appear, as for example Spotify’s launch in Germany in March 2012.

Another aspect, which has to be taken into consideration regarding the organizational use of social media, is the targeting of people at the age of 50 and older on social networking sites. This challenge derives from the simple fact that this generation is not yet present on social media in such a great extent. In nearly the same manner, it is hard to target the so-called preteen generation, around the age of 12 years and younger. Due to age restrictions concerning the membership registration on social networks, this segment should not be present. Nevertheless, many underage users bypass this restriction by falsifying their submitted date of birth. This results in the paradox of a totally invisible target segment, which unrecognizably exists.

Not pinpointed as a real challenge, rather as a side effect, Mr. Lepges brought up the lack of control regarding user generated postings and comments, which derives from the present freedom of expression. This might lead to negative, deconstructive criticism about the company, products, artists or any other topic.

In addition to the previously mentioned challenges, Oliver Lepges stated that social media provoke a time-consuming, and therefore costly, learning process, because of its huge application possibilities and complexity. As for example, time has to be spent on following and detecting upcoming trends, as business models have to be developed and adapted in order to earn money on new opportunities. In addition to this, a lot of employees are not aware of the impact their personal behavior can have within social media. The huge complexity and fast changing social media environment makes it too time-consuming for Sony Music Germany to realize an extensive training program for all responsible employees.

Constantly recurring major threats for the music industry are piracy issues, which exist to a great extent also on social media. Third-party uploads are especially recognizable on content communities like YouTube in Germany, as the GEMA, an organization concerned with the property and reproduction rights of artists, prohibits and restricts certain content. (GEMA, s.a.) After the GEMA takes down this content, it is often re-uploaded illegally by others. As mentioned before, Sony Music Germany earns money on their published content and that is

62 why third-party uploads of videos and audio files, as well as audio streaming software, not being bound contractually to the company like grooveshark for example, can be considered as a huge challenge.

5.1.2.4 COMPANIES’ STRATEGIES TO DEAL WITH THE CHALLENGES

Concerning the previously stated challenges, we further asked Oliver Lepges, if and how Sony Music Germany deals with them.

In order to cope with the challenge of losing its user base and their data, caused by quickly changing trends, Sony Music Germany established communities, hosted by the company itself. Hence, independent from preferential social networking sites, a certain amount of data regarding the company’s customers is collected, stored, and therefore not exposed to get lost.

For the purpose of targeting hardly reachable users from an older generation, Sony Music Germany still uses “old-school” online communications like message boards, newsletters and emails, which seem to be preferentially used by this age group. Regarding the preteens and younger generations, the company provides chat rooms, where fans of bands or artists can discuss and exchange information about them.

Oliver Lepges interprets negative comments and deconstructive criticism not as a real challenge as it is nearly unavoidable, but as something a company needs to accept and learn to deal with.

He furthermore explained that training concerning social media and arising trends takes place in smaller cells to give product managers knowledge about actual happenings in the social media world, which then try to pass this information to the next hierarchical level. Knowledge and experience about new applications like Spotify, which has already been present in Sweden for a longer period of time, is gained by swapping ideas with international collaborators. An overall strategy how to use social media in general does not exist explicitly, as the business is considered to be “too young” and the environment changes too fast. But in order to educate employees and regulate their private behavior within social media, Sony Music Germany introduced a contractual netiquette on how to behave.

In alignment with past copy protections on conventional physical media, like CDs, the music industry tried to introduce digital rights management, restricting the play-back of audio files to certain software, like iTunes, or hardware devices. Although this solution temporarily solved problems regarding pirating, happened this at the expense of honest customers, because they were enforced to deal with compatibility issues. Sony Music considered this as an imposition for their customers and sells digital audio files without any protection these days. Oliver Lepges explained that they always try to make deals with content communities, like YouTube, and streaming providers, as for example Spotify, determining usage and property rights of the provided content, as well as contractual agreements regarding monetary returns. The company deals with piracy issues in terms of illegal distribution and sharing of audio files by filing law suits on a legal basis.

5.1.2.5 FUTURE OUTLOOK

Oliver Lepges estimated an ongoing growth of social media, particularly of social networking sites for the upcoming five years, as the 50+ generation is not yet completely present, making social media even more important in the future. He furthermore thinks that the trend will develop towards a strengthened integration of mobile phones and applications, as well as the focus on actually selling audio and video files will fade into the background, whereas the property and usage rights management will become a major task.

5.2 CASE B: ERICSSON LABS

Ericsson Labs, located in Luleå, Sweden, is a division of Ericsson Research, focusing on “iterative open innovation” and developing “new technologies, services and business models”. Ericsson is headquartered in Stockholm, Sweden, and one of the global leaders in telecommunication services and network technology, as well as it provides multimedia solutions for the media industry. In the year 2011, Ericsson achieved net sales amounting to 35.01 bn. $, resulting in an operating income of 3.35 bn. $. The company employed at the end of 2011 104,525 people worldwide of which 17,500 in Sweden. 20,600 employees are working in its research and development department globally. (Ericsson Labs, s.a.)

Ericsson Research in Luleå is the second largest research site in Sweden after Stockholm with 50 employed persons and is located next to and collaborating with the Luleå University of Technology. This subdivision of Ericsson, called Ericsson Labs, is concerned with the provision of access to so-called application programming interfaces (APIs) for mobile and web application developers. Ericsson Labs therefore provides the network, servers and support for developing new or improving existent applications. Furthermore, the company helps third-party developers to test their applications, to commercialize and to make them available to end-users. (Ericsson Labs, s.a.)

The interview was conducted face-to-face in English with Tor Björn Minde on 14th May 2012. Mr. Minde joined Ericsson in 1986, leads Ericsson’s Service Innovation teams and is the Head of Ericsson Labs. Additionally, he is active as Adjunct Professor in signal processing at Luleå University of Technology since 1998.

5.2.1 DATA FROM OBSERVATION

Ericsson Labs’ website has an embedded blog, providing news and information. Within one of their blog postings, the company mentions all public social media platforms, which it is utilizing, namely Twitter, Facebook, YouTube, SlideShare, LinkedIn and Delicious. Moreover, the company hosts its own developer community, referred to on its website.

5.2.2 DATA FROM THE INTERVIEW

Ericsson Labs in Luleå was established in the fall of 2008 and started its activities in the social media environment simultaneously. Since the purpose of this division is to encourage bilateral collaboration, which mainly depends on people and their engagement, social media has been utilized to reach out to, as well as to handle a lot of persons at the same time.

5.2.2.1 SOCIAL MEDIA USE OF COMPANIES IN DIFFERENT VALUE CHAIN ACTIVITIES

Ericsson Labs’ main effort concerning social media is in regard to research and development. Therefore, it launched the so-called “developer community”, a common platform for developers, designers, technology providers and other interested persons to gather, exchange knowledge and to identify potential partners for collaboration. In addition to this, the company provides a showroom, where prospective applications can be tested, rated and commented by the community to receive feedback and suggestions for possible improvements. The developer community also offers the opportunity to swap ideas and discuss among each other in message boards. In addition to Twitter and Facebook, Ericsson Labs uses YouTube to show demo versions and tutorials of its APIs, SlideShare to share presentations, Delicious to provide links related to industry relevant news and articles, as well as LinkedIn and an own blog.

Tor Björn Minde stated that they started in the social media world by using Twitter, in order to inform about and engage interested persons in Ericsson Labs’ products and services. The Twitter account is run by Mr. Minde himself, where he among others tweets about recent developments in their community. In addition to this, Ericsson Labs runs a Facebook account, where the annual Ericsson Application Award is promoted.

Regarding human resource management, Ericsson Labs does not make specific efforts in terms of recruiting, that is why the company is not actively publishing job offers on its social media presences or in job portals. Tor Björn Minde determined occasionally occurring applications as a side effect of their general social media activities, as people get interested in the company. He furthermore elaborated, that more specific and suitable applicants derive from LinkedIn. Although Ericsson Labs is not pursuing direct human resource purposes, the corporation’s HR department started to use this opportunity in the meantime.

Additionally, Ericsson uses social software internally, provided by IBM, in the form of an internal social network for employees. Besides the opportunity to discuss and exchange information, the network includes features like wikis, to gather knowledge in respective departments, as well as discussion boards. For the purpose of getting internal feedback, ideas and suggestions for new projects, this tool can be utilized as well. Mr. Minde also stated that the possibility of recruiting staff internally is not used at all.

5.2.2.2 PERCEIVED BENEFITS USING SOCIAL MEDIA FOR COMPANIES

Tor Björn Minde mentioned that in the Internet a lot of noise is omnipresent in forms of irrelevant information, news and for example press releases. He claimed that social media provides the best opportunities for them in order to break through these disturbances and to reach the desired persons. Furthermore, social media can be easily used to reach out to a broad audience, manage a lot of contacts at the same time and simultaneously create awareness about the company and its projects.

As previously mentioned, the major business objective of Ericsson Labs is to encourage the collaborative development of applications, which is highly supported by social media. The developer community enables experts from various fields to gather, to exchange information and knowledge, as well as to give and receive feedback. Due to this fact, a collaboration effect can occur, initiating discussions and providing an insight from various different perspectives, which has a positive impact on the quality of the development of applications. Such positive impact might derive from early bug or failure detections, new ideas or other suggestions for improvements.

As Mr. Minde stated, most Tweets are linked to Ericsson Labs’ website, persuading Twitter followers to visit it to gain further information. Therefore, the community comprises a huge number of active users and experts these days and has become in some degree independent, because of community members often trying to help each other to solve problems on their own. Consequently, this unburdens Ericsson Labs, as they do not always have to take action.

5.2.2.3 CHALLENGES FACED BY COMPANIES USING SOCIAL MEDIA

According to Tor Björn Minde, a lot of challenges are associated with the organizational usage of social media. As an example, he mentioned that social media helps to communicate with many people simultaneously, but apart from that, these contacts are quite superficial, not allowing in-depth discussions. Furthermore, Ericsson Labs, but also the corporation itself, is subjected to negative feedback and criticism on their online presences, resulting from the freedom of speech. Subsequently, Mr. Minde explained that the usage of a new social media application is always accompanied by a time-consuming learning process.

A major threat of using social media for a company to communicate with others is the unconscious sharing of company secrets. Additionally, Tor Björn Minde elaborated the risk of vanishing of popular social media platforms by referring to the example of amplify, which was first considered as an opportunity to take advantage of, but was unable to make profit and quickly became irrelevant for Ericsson Labs. In alignment with the vanishing of social media networking sites, the risk of losing the entire user base, as well as their important data arises.

Moreover, Mr. Minde complained about the non-existence of a social media tool, comprising all desired features, forcing Ericsson Labs to be present on various platforms at the same time. This is not only time-consuming, but it can also turn into a major challenge, as it becomes demanding to keep up with the regular provision of new content in the fast-paced social media environment.

As a side effect of employees engaging on LinkedIn, according to Tor Björn Minde, companies are steadily facing the risk of losing experienced workforce to competitors as part of their headhunting activities.

5.2.2.4 COMPANIES’ STRATEGIES TO DEAL WITH THE CHALLENGES

Subsequently to the questioned challenges, Mr. Minde outlined how Ericsson Labs tries to overcome and deal with these issues.

For the purpose of leading an in-depth discussion, which is hard to realize by using social media, Ericsson Labs still keeps on conducting face-to-face meetings with its key partners and experts, whereby a more detailed exchange of specific information can take place.

In order to deal with negative feedback and deconstructive criticism, which Tor Björn Minde considered as unavoidable, the company always tries to respond in its area of competence, as far as it is possible. Particularly if the feedback concerns products or services from Ericsson Labs, the company usually looks for initiating a conversation with the respective user, in order to remedy dissatisfaction and misunderstandings.

In alignment with nearly every implementation of new activities or functions, employees need a certain time to adapt to the new conditions, as well as to learn the utilization. Mr. Minde, who is responsible for Ericsson Labs’ Twitter account, mentioned that he gained first insights by using social media in his private surrounding and by consulting literature. After basic skills regarding the respective tools have been developed, deeper expertise can be obtained, as Tor Björn Minde stated, by learning by doing.

Ericsson introduced a sort of corporate netiquette, which entails terms of behavior for employees, conveying how to represent the company on social media. These terms are no distinct regulations, but rather a “mindset”, proposing to continuously bear in mind “why something is done”. In addition to the netiquette, Ericsson pursues an overall social media strategy, which is interlinked to its core branding, marketing and communication strategies, consistently trying to support them.

The company selects their utilized social media tools in a two-step process. At first, they ascertain the tools, offering the desired features for a specific purpose, like for example video sharing. Subsequently, only the market leading platforms with the biggest user bases are selected, in the case of video sharing, YouTube was chosen. Utilizing the most popular platforms already provides a certain degree of assurance. Steadily overlooking and analyzing the used social media tools, as well as upcoming trends, enables Ericsson Labs to quickly adapt to changes and switching providers, if necessary. Furthermore, most publications on social media are linked to the company’s website and developer community, where visitors are given the opportunity to register an account. Thereby user data is stored independently from other social media hosts and remains, if a platform vanishes.

Mr. Minde stated that Ericsson Labs deals with the challenge of keeping up with the frequent provision of content by using hootsuite, a tool facilitating the scheduling and publishing on various platforms simultaneously. Moreover, the company does not appoint employees directly to work with social media, but entrust enthusiastic and committed, mostly younger co-workers with this task.

5.2.2.5 FUTURE OUTLOOK

As the social media world quickly changes and evolves, Tor Björn Minde held out the prospect of making more efforts. According to this, Ericsson Labs will continue to analyze the market and its development and utilize new or more influential social media applications, if it provides enough potential. In alignment with this, the company started building up a community on Google groups as a side project one year ago and observes its growth.

5.3 CASE C: SONY PICTURES HOME ENTERTAINMENT GMBH

Sony Pictures Home Entertainment GmbH (from now on referred to as SPHE), previously known as RCA Columbia Pictures Video, was founded in 1983 and is located in Munich, Germany. SPHE is a subsidiary of Sony Pictures Entertainment, which is wholly owned by the Sony Corporation of America and therefore also belongs to the Japanese Sony Corporation. The company is concerned with the distribution of movies and the promotion of the latest cinema motion pictures. (Sony Pictures Home Entertainment, s.a.)

SPHE is one of the market leading producer, marketer and distributor of DVDs, Blu-ray Discs and UMDs in the world, having 15 international subsidiaries and distribution partners in more than 60 countries, as well as a portfolio comprising more than 3,500 movie titles. The company was the first major company introducing DVDs on the German movie market in the year 1998. Besides cinema motion pictures, television productions, as well as special interest themes represent SPHE’s product portfolio. (Sony Pictures Home Entertainment, s.a.)

We had the honor of conducting an interview with Mr. Andreas Bork, who is Head of Digital at SPHE. His division is responsible for the promotion and distribution of motion pictures digitally in online stores of their affiliates like Amazon and iTunes, as well as on Video on Demand platforms, as to mention maxdome.de and Videoload.de for the German, Austrian and Swiss market. The digital division additionally collaborates with two external marketing and PR agencies, namely Heye OMD and Way2Blue, which are concerned with the social media marketing of SPHE.

The interview was conducted on the 16th of May 2012 in German via telephone.

5.3.1 DATA FROM OBSERVATION

The observation of SPHE’s social media efforts, visible to the public, showed that the company utilizes Facebook, Google+, Twitter and YouTube, which are also linked on their actual website. Furthermore, job offerings on online markets could be found, including StepStone.de and Monster.de, as well as a professional social networking appearance on Xing.

5.3.2 DATA FROM THE INTERVIEW

The Digital division of SPHE was founded together with the recruitment of Mr. Bork in March 2011 and started using social media since then. As mentioned above, it is supported by two external agencies, which have access to SPHE’s promotional data and are responsible for the regular content provision on the various social media channels. This task was outsourced due to the lack of time and manpower with the necessary competences. The collaboration is very close, where the agencies offer several possible campaigns based on the company’s objectives, which are subsequently decided on in a meeting with the Digital division, including more detailed goals and desired key performance indicators (KPIs).

5.3.2.1 SOCIAL MEDIA USE OF COMPANIES IN DIFFERENT VALUE CHAIN ACTIVITIES

Mr. Bork mentioned that SPHE has already been present on social media before the establishment of his division, as fans hosted and administrated various blogs and forums about their favorite movies and actors since the beginning of the social media development. The company provided some of the blogs with legal content, like high-resolution pictures and trailers of movies to support them, but did not actively include such activities in their marketing mix until March 2011.

Nowadays, SPHE is present on Facebook and Twitter to post news and exclusive content like sneak previews and trailers of their movies, as well as interviews with the starring actors. Furthermore, the company uses these platforms to promote releases and special offers of their products at the connected online stores like Amazon and iTunes. The platforms are selected based on the size and range to attract the desired target group, which is 18 years or older and who are more likely to purchase home entertainment products. Another required feature for the selection of an appropriate social media tool is the possibility to embed videos from streaming and sharing sites like YouTube or MyVideo as “this is SPHE’s medium” and therefore essential for its marketing purposes. Concerning the use of social networks in regard to HRM, Mr. Bork mentioned that occasionally position offerings like an internship with direct link to the webpage for more detailed information are posted on Facebook, Twitter or Xing profiles, but it is not pursed actively for recruitment.

Andreas Bork further referred to the opportunity for customers to evaluate and review their purchased content on online stores like Amazon or iTunes, as a CRM aspect. He explained that the feedback on the company’s products are read by the responsible managers, but only

72 to detect and recognize possible product failures concerning the hardware or quality. When we asked Mr. Bork about the usage of social media in regard to internal communication, he stated that there are no internal groups or networks for this purpose, but that SPHE uses internal wikis and SharePoint to communicate about which he was not allowed to further elaborate their usage as the entailed data is too company sensitive.

5.3.2.2 PERCEIVED BENEFITS USING SOCIAL MEDIA FOR COMPANIES

According to Andreas Bork, Facebook is currently the biggest communication platform and therefore the hub for SPHE’s target group, which makes it inevitable to be present. Because of the ongoing growth, especially with regard to social networks, he sees the huge potential of reaching out to millions of possible customers as the main advantage of social media. Therefore, SPHE posts news and exclusive content about its movies in order to create a buzz around the title already before it is even published and subsequently promotes the offers of the partner online stores like Amazon and iTunes to initiate actual sales and create revenue. In regard to the online stores, which provide review systems, as mentioned earlier, the product managers of SPHE analyze the feedback concerning the hardware and quality in order to detect failures and to react on them if necessary, as well as to take the information into consideration for future product improvements.

Additionally, Mr. Bork referred to the emotional products of SPHE, which can originate whole fan cultures and regarding the vast user base of social networks like Facebook, they provide a very beneficial platform for such cultures to expand and therefore create further awareness about the product itself. He further added that such social media tools enable SPHE to target its customers more directly and efficiently, resulting in improved marketing efforts, which might establish or strengthen already existing emotional bonds between the customers and the products. Moreover, Andreas Bork mentioned that the engagement in social media does not only bring short-term advantages like promoting an upcoming movie or DVD, but also long-term benefits in the form of creating a positive and modern image, as SPHE is present in the most famous communication platforms and part of the current trend.

5.3.2.3 CHALLENGES FACED BY COMPANIES USING SOCIAL MEDIA

During the interview, Mr. Bork brought up several challenges that SPHE has been facing while utilizing social media for organizational purposes. From his perspective, the continuous

73 provision of creative and interesting content is the biggest hurdle to be successful. He elaborated that it is necessary to be very active and to work closely together with the users to analyze what sort of content they desire and expect, in order to obtain more fans and establish a certain degree of credibility among them. This task is vital for a social media appearance and demands a lot of manpower and time, which is directly linked to a high amount of costs. Besides the steady provision of content, gaining basic knowledge and experience with the application of social media is also very time-consuming.

In regard to the cost aspect, Andreas Bork added the difficulty of measuring the non- monetary benefit of these activities compared to traditional marketing tools, as the usual formula to calculate such a return on investment is not applicable in this case. Furthermore, he mentioned illegal activities like hacking, if SPHE employees would exchange internal information on social networks, or pirating movies as a big general risk for SPHE and its industry. Especially the illegal downloading of movies via so-called torrents is a major concern for the company, as a lot of social network users are aware of such possibilities and if SPHE creates a lot of buzz about a certain movie, it might lead them right to an illegal downloading site instead of an honest purchase. As last threat, Mr. Bork referred to the need of being active and up to date all the time in terms of observing current developments of social platforms. In case one of the used tools might experience a decrease of popularity and subsequently vanish over time, the invested time and money in obtaining a big user base in regard to its accompanied data would get lost as well.

5.3.2.4 COMPANIES’ STRATEGIES TO DEAL WITH THE CHALLENGES

In alignment with the outlined challenges above, SPHE follows a certain set of strategies to deal with them.

In order to manage the continuous provision of relevant topics, the Digital division collaborates with two external marketing agencies, as mentioned above. They offer the required competence and manpower to provide creative and interesting content for the followers. Concerning the agencies’ strategy how to reach out to subscribers, they present several campaigns and SPHE chooses the most appropriate one based on its general marketing goals. Regarding the measurement of the success of these goals, SPHE is able to count the actual sales numbers via the online stores Amazon and iTunes. Additionally, the company uses certain analysis tools, which help interpret click rates to track the range of their marketing activities within social media.

For the purpose of avoiding hacking attacks, SPHE does not utilize an external platform for internal communication to protect its company sensitive information. Considering illegal downloads of its products, the company itself cannot do anything besides creating attractive legal offers for customers and constantly improve them. For this task, they rely on institutions like the Gesellschaft zur Verfolgung von Urheberrechtsverletzungen (GVU) in Germany for example, which pursue and gather information about copyright violations and hand these over to law enforcement agencies to take action. (GVU, s.a.)

Regarding the risk of vanishing social platforms and its accompanied user base, including their data, SPHE and the agencies steadily observe and analyze the developments and trends. In order to detect trends early, the company considers enquiries by fans, who ask for content via e-mail to publish on their blogs or new platforms, as they usually are closer to trends and current developments in the social media environment. Furthermore, SPHE also provides newsletters, which can be received after registering on its website and allowing the company to collect and save data, independent from the development of social media platforms.

Mr. Bork stated that SPHE does not pursue a concrete social media strategy in general, but adapts its objectives for the two agencies in alignment with its core marketing goals. Additionally, the company focuses on the promotion of its products, instead of SPHE itself, because according to Andreas Bork, the customers do not care about the provider, but rather on the content including the movies, their actors and directors. Therefore, the main purpose of the social media usage is to keep customers informed about new releases, upcoming movies and information about the related actors. Moreover, the company has certain behavior rules for its employees, including a guideline for the behavior in social media if they are acting in the name of SPHE.

5.3.2.5 FUTURE OUTLOOK

As classical marketing tools, for example print-media, lose importance, SPHE tries to implement parts of the social media tasks to the company and shift some of its competences from the outdated fields, to the upcoming online marketing area. In addition, SPHE has a lot of media partners including television partners like Pro7 and Sky or the connected online stores amazon and iTunes, which are very present on social media. Therefore, SPHE has to adapt its activities as well to be able to coordinate exclusive deals and existing programs with these partners.

5.4 CASE D: RUD KETTEN RIEGER & DIETZ GMBH & CO. KG

RUD Ketten Rieger & Dietz GmbH u. Co KG (from now on referred to as RUD) is headquartered in Aalen, Germany and was founded in 1875 by Carl Rieger and Friedrich Dietz. The company with more than 120 production facilities and sales offices worldwide provides lifting and lashing means, snow chains, conveyor and drive systems, military technology, hoist chains and tire protection chains for the mining industry, in which they are market leader. Besides these products, the RUD Group furthermore comprises subsidiaries concerned with the production of outdoor furniture and outdoor gymnastic apparatuses, as well as safety and grab rails for the sanitary area. RUD is mainly doing business in a B2B and B2G context with big companies and governmental institutions. The company has an annual turnover of 170 million euros and employs about 1,800 people in the entire world. (RUD, s.a.)

We had the pleasure of conducting an interview with Friedrich Goetz, CEO of RUD BarrierTech GmbH. This affiliated company of RUD provides protection systems against natural hazards, as for example rockfall, unstable slopes, landslides or snow avalanches. Mr. Goetz started working for RUD three years ago, after a 27 years lasting employment at BMW, where he among others was responsible for the worldwide communication in distribution.

The interview took place on 18th of May 2012 in German via telephone.

5.4.1 DATA FROM OBSERVATION

The search for social media platforms and accounts operated by RUD was unsuccessful, as no accounts on big public networks or content communities could be found. By browsing through RUD’s website, no links were found indicating any public accessible social media platform. However, a platform for collaboration among registered users, namely the RUD Secure Collaboration Portal, could be located.

5.4.2 DATA FROM THE INTERVIEW

Mr. Goetz stated, concerning RUD’s beginning of utilizing social media, that the company is not present on public social platforms like Facebook, LinkedIn or Xing. Nevertheless, RUD adapted early to the communicational opportunities, which arose with the commercialization of the Internet and most of their communication still takes place on the basis of classical Internet services like e-mails and personal or company websites. Furthermore, a lot of their business is done via telephone.

5.4.2.1 SOCIAL MEDIA USE OF COMPANIES IN DIFFERENT VALUE CHAIN ACTIVITIES

Mr. Goetz exemplified that social media is used for the purpose of finding new possible customers and to subsequently get more information about them. He elaborated this opportunity as a two-step process, where at first the classical search engines Google and Lycos are consulted, to determine possible customers by defining specific search tags. In the case of finding a suitable, potential company or institution within the results of the search engine, their respective website will be looked up. As Mr. Goetz clarified, these websites are most often web portals, offering interested and potential business partners the possibility to register, to submit company specific information and most often to gain access to a section with enquiries or requests for proposals.

Although most of the communication is handled personal via e-mail or telephone calls, RUD has an intranet appearance, which is mainly used to communicate internally as well as to provide information in regard to quality management or distribution results. In respect to an employee’s responsibilities, he can access various areas, providing relevant information. As for example co-workers, which are concerned with the distribution, are able to access customer information, as to mention core data and complaints. In addition to this, the intranet comprises a general section, which is accessible for every employee and where everyone is able to post certain problems and swap ideas on them.

In addition to the previously mentioned applications and possible uses of social media, RUD provides an own section for their customers on their website. The so-called RUD Secure Collaboration Portal is a platform for registered employees and customers, granting access to information and applications. Within this area, customers can find tools, which help to determine product specifications and subsequently suggest suitable offerings. Companies and state institutions, which already belong to RUD’s clientele, as well as interested potential customers, are given access to this portal.

5.4.2.2 PERCEIVED BENEFITS USING SOCIAL MEDIA FOR COMPANIES

Since RUD is a very globally spread company, the intranet is used to facilitate communication among employees, to connect the subsidiaries and to exchange information faster and easier, which also simplifies the management of the affiliates abroad. According to Mr. Goetz, another opportunity of the intranet is the possibility to submit information about business travels of employees. This allows the top management to schedule meetings with customers quickly by contacting an employee, who is on a business travel regionally close to a customer.

Concerning the RUD Secure Collaboration Portal, Mr. Goetz revealed that orders can be placed automatically and are processed in the same manner. This fact, combined with the tool to determine product specifications, facilitates and expedites the sales process enormously, since it saves a lot of paperwork, respectively time and less staff is required. In addition, the portal provides a lot of information for customers, which makes its exchange more effective.

5.4.2.3 CHALLENGES FACED BY COMPANIES USING SOCIAL MEDIA

In alignment with internal communication, Mr. Goetz mentioned two risks he associates with it. Firstly, if internal information is exchanged on an external online platform, the threat of this data being intercepted by unauthorized persons or groups exists, as the various Internet redirections and servers are often inexplicable. Secondly, Mr. Goetz elaborated that people, having access to all intranet functions used for internal communications, might publish incorrect information as they do not have the necessary topic related knowledge.

As a major challenge for the implementation and utilization of social media, Mr. Goetz denominated the required huge commitment of employees, in order to quickly react on customer enquiries, as well as a time-consuming learning process.

By mentioning the example, of someone posting, that he has recently eaten a slice of bread with honey, Mr. Goetz illustrated the challenge of information overload, which exists on social networking platforms, where people tend to post and comment a lot of irrelevant information. Additionally the CEO of RUD BarrierTech GmbH claimed that for his company the right audience is just not present on social networking platforms, as the target group basically consists only of companies and state institutions and the products RUD provides are too expensive and not suitable for a mass audience.

5.4.2.4 COMPANIES’ STRATEGIES TO DEAL WITH THE CHALLENGES

Especially the last mentioned challenge of information overload and the non-existence of potential customers of RUD is one of the main reasons, why the company does not actively use social media and in particular social networks so far.

In order to avoid the interception of internal data, Mr. Goetz mentioned that communication among employees only takes place personally or on the intranet, which is not accessible online, but linked to RUD’s worldwide subsidiaries peer-to-peer. To avoid false information to be published on the intranet, areas are restricted to the respective responsible persons, meaning that every employee can only enter the sections, which he is concerned with.

5.4.2.5 FUTURE OUTLOOK

Regarding the company’s future utilization of social media, Mr. Goetz explained that a company presence in a social network could be imaginable, but only if this network was meant for business purposes only. That is why he also considered the usage of Facebook or any other social networking site as irrelevant in the future.

6 DATA ANALYSIS

In the following Chapter 6, the previously gathered information and data will be analyzed in regard to our research questions on the basis of the in Chapter 3 constructed frame of reference, as once more displayed in figure 6.1 below. In the beginning of the data analysis, each case will be investigated isolated in a within-case analysis, followed by a comparison of all cases in a cross-case analysis, in order to determine similarities, as well as differences.

The data analysis will be structured according to the research questions in the following way:

RQ 1: What types of social media do companies use in different value chain activities? RQ 2: How can the perceived benefits of using social media for companies be described? RQ 3: How can the challenges, faced by companies using social media, be characterized? RQ 4: How can the companies’ strategies to deal with these challenges be described?

The pursued goal of a data analysis is not only to elaborate solution approaches to the research problem and questions, but also to link and apply the theory to the collected data. Therefore, the previously constructed frame of reference, comprising relevant theory, will be consulted, as displayed in figure 6.1 below.

Figure 6.1: Frame of references

6.1 WITHIN-CASE ANALYSIS: CASE A – SONY MUSIC GERMANY GMBH

6.1.1 TYPES OF SOCIAL MEDIA USED BY COMPANIES IN DIFFERENT VALUE CHAIN ACTIVITIES

Kaplan and Haenlein (2010) classified social media regarding their degree of social presence/media richness and self-presentation/self-disclosure, determining six different forms of social media, namely blogs, collaborative projects, social networking sites, content communities, virtual social worlds and virtual game worlds. According to Oliver Lepges, Sony Music Germany uses the following social media types:

 Blogs: Twitter  Collaborative projects: Amazon, iTunes (customer evaluations) Monster.de, StepStone.de (job markets)  Social networking sites: Facebook, MySpace, LinkedIn, Xing  Content communities: YouTube, MyVideo.de, Sevenload, tape.tv  Others: Spotify, Intranet

Collaborative projects, as to mention wikis as a classical example, are characterized by a rather low degree of self-presentation/self-disclosure as well as a low degree of social presence and media richness. In alignment with this characteristics, we classed the customer evaluation and feedback features of online stores like Amazon and iTunes, as well as job markets like Monster.de and Stepstone.de, in this category, as the influence a company has on these features can be considered as rather low compared to a direct dialog on social networking sites, as well as the provided information on these platforms is very limited.

Besides the classical six types of social media, determined by Kaplan and Haenlein, various tools are available these days which cannot be defined as social media particularly, but make partly use or are interlinked to its features. As an example Spotify can be mentioned, which basically is an audio streaming software, but uses data from Facebook to connect with friends. Sony Music Germany does not use specific software, like internal social networks, but operates an intranet within its organization, providing opportunities to initiate internal communication. As it is hard to determine its features, the company’s intranet is classed as “others”.

Porter (1998, p. 37-38) separated a company’s activities into two major types, primary and support activities. The primary activities include in- and outbound logistics, summarized as logistics, operations, marketing and sales, as well as service, nowadays often referred to as

CRM. The support activities in a company’s value chain contain firm infrastructure, human resource management, technology development and procurement. Cyganski and Hass (2008, p. 105) elaborated different opportunities how social media can be used within certain activities. In the conducted interview, Oliver Lepges clarified that Sony Music Germany uses social media tools mainly in the field of marketing and sales, but also partly makes use of its features in terms of human resource management, customer relationship management and rudimentarily for logistic purposes.

Table 6.1 below displays which types of social media are used by Sony Music Germany in the various primary and secondary activities.

Table 6.1: Used types of social media in Sony Music Germany’s value-chain activities

Firm Infrastructure Firm HRM TechnologyDevelopment Procurement Logistics Operations Marketing Sales & Service/ CRM Blogs x x Collaborative Projects x x Social networking sites x x Content communities x Virtual social worlds Virtual game worlds others x x x

6.1.2 PERCEIVED BENEFITS OF USING SOCIAL MEDIA FOR COMPANIES

Cyganski and Hass (2008) revealed a lot of opportunities and benefits for companies in several value-chain activities, where social media can facilitate tasks. Besides specific functional applications concerning the respective activity, which have been elaborated by several authors and summarized in our frame of reference, social media can be applied nearly everywhere to simplify information gathering, communication and knowledge exchange.

Concerning the support activity firm infrastructure, social media can be used to facilitate internal communication, knowledge exchange, as well as collaboration. (Cyganski & Hass, 2008, p. 110) Although Sony Music Germany possesses an intranet platform, offering possibilities for employees to discuss with others in message boards or providing information in shout boxes, social media is almost not used for these internal purposes.

In accordance to Ronald Ebert (2012, p.194), who defines human resource management as a set of organizational activities in order to attract, develop and maintain an effective workforce, social media can be used especially for the purpose of recruitment. (Cyganski & Hass, 2008, p. 105-106) Oliver Lepges stated that Sony Music Germany announces open posts and internships in big online job markets, as to mention for example StepStone.de and monster.de. Especially internship positions are furthermore published on Facebook and Twitter, both providing a direct link to the career section of the company’s website.

Logistics is basically concerned with the flow of products within an organization and its delivery. (Skjøtt-Larsen et al., 2007) (Christopher, 2011, p. 2) Regarding social media, a particular logistic usage concerning the physical delivery of products could not be detected. Sony Music Germany distributes a wide choice of their products also digitally on online stores, as well as on audio streaming tools. The Director Online of the company’s Catalog & Concept Division stated that for the allocation of digital formats, in particular the upload to the respective platforms, certain software is used, in order to automate and facilitate this process.

Besides the organizational usage of social media in support activities, benefits can also be perceived in terms of facilitating tasks in primary activities, like for example concerning marketing and sales. This activity is, in regard to Porter (1998, p. 40), concerned with the provision of a purchase opportunity to possible buyers and activities to induce them to do so. Mangold and Faulds (2009, p. 359) determined two ways of the promotional usage of social media, which are at first the opportunity to directly reach out to a company’s target customers and secondly the boost of communication among users, described as an extension of the traditional word-of-mouth communication. The data from the interview revealed that Sony Music Germany puts the main effort regarding their social media utilization in promotional aspects. Mr. Lepges stated that social media has become the main channel for communicating with their target group easy and in a cost-efficient way. The company is engaging users and tries to make their news posts, comments and embedded or linked content, concerning their artists, bands and songs, go viral. By integrating advertisement in forms of web banners or links, customers can directly visit online stores, where they are

given the opportunity to purchase the promoted products. Oliver Lepges furthermore explained that Sony Music Germany owns money on streamed content on social media platforms, what can more or less be considered as a form of sales.

Feedbacks on social networks, as well as on online stores, are taken into account by Sony Music Germany in order to detect and recognize technical failures in their products. This process can be considered as part of after-sales service, respectively CRM to evaluate and create customer satisfaction. By continuously providing content, the company also tries to establish customer loyalty and to maintain and enhance their user base.

In alignment with technology development, procurement and operations, no utilization of social media by Sony Music Germany could be determined.

Figure 6.2 below summarizes the different application possibilities Sony Music Germany uses.

FIRM HUMAN RESOURCE TECHNOLOGY PROCUREMENT INFRASTRUCTURE MANAGEMENT DEVELOPMENT

 Existing, but barely  Recruitment used possibilities for internal communication

Support Activities Support

IN-/OUTBOUND OPERATIONS MARKETING & SERVICE LOGISTICS SALES

 Automatic provision of  Promotion:  Consider negative feedback to digital products to the Directly reach out to detect technical failures early respective platforms audience  Customer engagement by Promote word-of-mouth Activities continuously providing exciting content on  Sales: popular platforms Initiation of sales by linking to stores

Primary Primary Earnings on streamed audio and video content

Figure 6.2: Social media utilization of Sony Music Germany in regard to their value-chain

6.1.3 CHALLENGES FACED BY COMPANIES USING SOCIAL MEDIA

Besides a various number of benefits, social media, its implementation and its utilization is often associated with a number of risks and challenges at the same time. Cyganski and Hass (2008, p. 115, own translation), as well as Aula (2010 p. 44) determined the loss of control over the content on social media platforms as a major challenge, companies might face. According to Mr. Lepges, this challenge mainly occurs in terms of negative feedback and ratings of products in online stores, like Amazon, as well as partly on Facebook.

As revealed by Cyganski and Hass (2008, p. 115, own translation) and Andrew P. McAfee (2006, p. 27), social media require a huge commitment of the people, respectively the employees, in order to be a good working, successful tool for companies. For the purpose of engaging in social media actively in a useful manner, certain knowledge about behavioral effects has to be present about the utilization of social media, as well as concerning an employee’s personal behavior. (Baird & Parasnis, 2011b, p. 12) Oliver Lepges mentioned that not all employees are yet aware of the impact their personal behavior might have within social media and that the complexity and fast changing social media world makes it too time- and therefore cost-intensive to realize extensive training programs for all responsible employees.

According to Cyganski and Hass (2008, p. 102), a huge number of different social media tools and providers emerged and, as the past revealed, are not always successful over a longer period of time. The Director Online of Sony Music Germany’s Catalog & Concept Division elaborated, that even if a lot of effort is put into a social media platform, it can vanish quickly and become unappealing for users. In alignment with the disappearing of the social media tool, the user base and their data get lost. He complemented this challenge by explaining that the fast paced developments make it also hard to implement administrative functions, as new applications continuously emerge and platform structures might change.

As revealed after examining the data from the interview, Sony Music Germany is facing further challenges and risks, which were not discovered in the reviewed theory. One of these challenges, according to Oliver Lepges, is the targeting of people below and above the age range from 13 to 50 years. The older generation is simply not yet present on social media and the so-called preteens below 13 years should not be there. Nevertheless, they get access to social networking sites by falsifying their date of birth.

As Sony Music Germany is part of an industry, which is continuously subjected to piracy issues, the company has to face the challenge of avoiding and prosecuting the illegal online distribution of their music in digital formats, as well as dealing with the loss of earnings by third-party uploaded video content, originally created by Sony Music Germany.

Table 6.2 displays a summary of the challenges Sony Music Germany is or was facing.

Table 6.2: Summary of Sony Music Germany’s challenges regarding social media  Content / Control  Commitment  Time-intensive learning process  Vanishing of platforms and user data  New social media tools and changing structures  Targeting of specific segments  Piracy issues

6.1.4 COMPANIES’ STRATEGIES TO DEAL WITH THESE CHALLENGES

Concerning the challenges Sony Music Germany is facing, the company has some strategies to deal with them. In order to react on negative feedback, the developed “Strategy of attendance” by Aula (2010, p.48) is one possibility, which entails to take part in social media conversations as a listener, but also to collect, share and consider information whenever the subject concerns the company or is important to the industry. Regarding Mr. Lepges’ statement, Sony Music Germany pursues a similar strategy as its product managers take in all comments, but only react on feedback concerning the hardware or quality of the product and ignore any deconstructive criticism.

According to Cyganski and Hass (2008, p.115, own translation), it is necessary that employees are willing to participate and receive support by the management in order to be successful in social media activities. For the purpose of avoiding time-intensive training for all employees, Sony Music Germany teaches its employees about social media trends and its usage in smaller cells. Therefore, the product managers are briefed about current trends, who subsequently pass this information to their employees to be up to date with the recent developments and to expedite the learning process. In addition, the company introduced a contractual netiquette on how to behave, to further educate its employees about the impact of their actions and regulate their private behavior within social media.

For the purpose of dealing with the vanishing of platforms, associated with the loss of user data caused by the quick changing and evolving social media environment, Sony Music Germany tries to establish smaller communities hosted by the company itself, in order to store user data independently from social media platforms. In alignment with the vanishing of platforms, new social media tools come up frequently. Oliver Lepges stated that a continuous observation of the developments and opportunities has to be done to keep track and if necessary to adapt to new platforms, whereby experiences from international collaborators, which are already familiar with these, are obtained. By taking this information into consideration, as well as recognizing trends towards new platforms in an early stage, it becomes easier for Sony Music Germany to engage in these new opportunities.

In regard to the challenge of targeting specific older generation and preteen segments, Sony Music Germany still uses traditional online communications like message boards, newsletters and e-mails, which are more appropriate for the group above 50 years. For the younger generation and their age limitations, the company provides chat rooms, which are independent from social networks.

The risk of piracy in forms of the illegal distribution of audio files, as well as third-party uploads of video files on content communities can have a major impact on Sony Music Germany’s earnings. In order to anticipate third party uploads of content, the company establishes contractual agreements with the regarding hosts like YouTube, entailing rules concerning these issues and settling earning regulations. As in the past, technical means to protect copy rights turned out to be to the detriment of honest customers and therefore Sony Music Germany prosecutes the illegal distribution of their products by filing legal procedures against offenders.

The strategies Sony Music Germany applies to deal with their challenges are summarized and displayed in Table 6.3 below:

Table 6.3: Summary of Sony Music Germany’s strategies regarding their social media challenges Challenges Strategies  Content / Control  Strategy of attendance  Commitment  Support by management  Netiquette  Time-intensive learning process  Training in smaller cells  Vanishing of platforms and user data  Continuous observation of developments  Establish own communities  New social media tools and changing  Continuous observation of developments structures  Exchange with collaborators  Targeting of specific segments  Usage of alternative tools  Piracy  Contractual deals with providers  Legal procedures

6.2 WITHIN-CASE ANALYSIS: CASE B – ERICSSON LABS

6.2.1 TYPES OF SOCIAL MEDIA USED BY COMPANIES IN DIFFERENT VALUE CHAIN ACTIVITIES

In the same manner as before, the information obtained from the interview, concerning the applied social media tools by Ericsson Labs, are categorized in alignment with Kaplan’s and Haenlein’s (2010) classification scheme:

 Blogs: Twitter, company blog, Delicious  Collaborative projects: Wikis Developer community  Social networking sites: Facebook, LinkedIn Internal social network software by IBM  Content communities: YouTube, SlideShare

Ericsson Labs publishes Tweets, as well as postings in their own company blog, about recent developments in their developer community, a platform providing several means of working together and making contacts among their users. Additionally they are using Delicious, a social bookmarking tool, to provide interested persons with links to relevant articles and news. We classed Delicious in the category Blogs as it fulfills a high degree of self-presentation/self-disclosure, as the company is able to present itself, as well as business related topics, and a low social presence/media richness, as communication among users and provided information is limited.

Due to the fact that Ericsson Labs is concerned with the research and development of new technologies, APIs and services, social media is mainly used in the support activity technology development. For purposes of facilitating internal communication among employees, the company also uses internal social network software, which can be classed in regard to firm infrastructure. Opportunities in the field of human resource management are barely used and determined as a side effect of social networking sites. Ericsson Labs uses social media additionally in the primary activities marketing and sales, as well as service, respectively customer relationship management and partly for procurement purposes. A summary of the value chain activities in which social media is used by Ericsson Labs is displayed below in table 6.4.

Table 6.4: Used types of social media in Ericsson Labs’ value-chain activities

Firm Infrastructure Firm HRM TechnologyDevelopment Procurement Logistics Operations Marketing Sales & Service/ CRM Blogs x x Collaborative Projects x x x x Social networking sites x x x x Content communities x Virtual social worlds Virtual game worlds others

6.2.2 PERCEIVED BENEFITS OF USING SOCIAL MEDIA FOR COMPANIES

As previously elaborated, various benefits can be perceived in different value chain activities. Regarding the support activity firm infrastructure and in order to facilitate the internal communication and collaboration, as well as to receive internal feedback on projects, Ericsson Labs utilizes social software by IBM, allowing them to swap ideas on new projects, as well as exchange and gather information, respectively knowledge, in wikis.

Concerning human resource management, Ericsson Labs is present on the social network site Facebook, as well as the professional network LinkedIn. Although they do not actively inform about job offerings, Mr. Minde determined a side effect of the presence on these platforms. Users of the platforms get interested in the work of Ericsson Labs, as well as the company itself and that is why they submit initiative applications. He furthermore reveals, that applications from LinkedIn are often more specific and suitable for the company. During the interview it was also clarified that Ericsson Labs does not actively lure away employees of other companies in terms of headhunting.

The third support activity in which Ericsson Labs utilizes social media is technology development. In the company’s own developer community, developers, designers, technology providers and others swap ideas about new projects, APIs and recent developments. Thereby information, as well as knowledge will be gathered and exchanged among participants. Furthermore, the developer community is a great opportunity to initiate

89 collaboration and bilateral research and development. The showroom feature within this community enables additionally the presentation and testing of new products, like APIs or new technologies.

In the last support activity procurement, Ericsson Labs exploits its developer community further by actively analyzing the various contributions and its dialogs with participants to identify potential partners and to initiate relationships.

In terms of the primary activity marketing and sales, social media is utilized for advertising, public relations and direct marketing. According to Kotler and Armstrong (2012, p. 408), advertising is concerned with the promotion of ideas, goods, or services. Ericsson Labs continuously showcases their new technologies and developed APIs in their blog postings and explain their features and functional principles in YouTube tutorials. Facebook is utilized to report about and promote the annual Ericsson Application Award. Public relations is among others concerned with obtaining favorable publicity (Kotler & Armstrong, 2012, p. 408), that is why the company steadily provides information about new developments and activities in their blog posts. Direct marketing is defined as connecting directly with consumers to obtain immediate response and to establish long lasting relationships (Kotler & Armstrong, 2012, p. 408). For this purpose, Ericsson Labs is always looking to engage in discussions with their user base and receives feedback by them, especially in their own developer community. This direct communication with their users is furthermore taken into account in regard to Ericsson Labs own products and technologies to make them more suitable to their users’ desires.

Considering the last primary activity service, respectively CRM, Ericsson Labs encourages customer engagement and attempts to react to all received feedback from any social platform it is actively using. Thereof, the company hopes to achieve a collaboration effect to obtain insights from various different perspectives, resulting in early bug or failure detections to improve the quality of developments. Furthermore, Ericsson Labs analyzes the feedback in order to come up with new ideas and listen to the suggestions for improvements to offer customer focused products. Due to the size of the community, members often try to help each other independently and to solve their problems on their own, unburdening the company, as it does not always have to take action.

Figure 6.3 below summarizes the different application possibilities Ericsson Labs uses.

FIRM HUMAN RESOURCE TECHNOLOGY PROCUREMENT INFRASTRUCTURE MANAGEMENT DEVELOPMENT

 Internal  Initiation of applications  General  General communication by users communication communication

 Internal information  Information gathering gathering  Information gathering  Knowledge exchange  Internal feedback on  Identify potential Projects and Ideas  Collaboration partners

Support Activities Support  Concept/Product testing  Initiation of relationships

IN-/OUTBOUND OPERATIONS MARKETING & SERVICE LOGISTICS SALES

 Product:  Customer engagement More customer-focused development  Direct dialogue

 Promotion Activities  More customer insight Directly reach out to audience

Promote Products,

Primary Primary Events, Developments

Figure 6.3: Social media utilization of Ericsson Labs in regard to their value-chain

6.2.3 CHALLENGES FACED BY COMPANIES USING SOCIAL MEDIA

In the same manner as in the previous within-case analysis, a closer look at challenges and risks Ericsson Labs is and was facing will be taken.

The theoretical defined challenge of losing control about the content, published or commented on social media, is also omnipresent for Ericsson Labs, in forms of negative comments concerning the company itself, as well as negative feedback regarding products or services. These negative comments can easily create an image of the company among the users, which varies from the organization’s self-conception. (Aula, 2010, p.45) Besides the challenge in regard to content, the interview revealed that it is hard to realize in-depth discussions with such a huge audience, as present on social media.

As already mentioned in the previous analysis, social media activities require an immense commitment by the employees. Mr. Minde affirms this, as he denominates the regular provision of new and relevant content as a time-consuming challenge. In his opinion, this derives from the fact that there exists no social media tool, which combines all desired features, forcing Ericsson Labs to utilize various platforms simultaneously. Closely related to the employees’ engagement on social networking sites, the risk of workforce being subject to competitors’ headhunters exists.

Mr. Minde stated, that the implementation and application of social media is always coupled with a time-consuming learning process to acquire basic knowledge about the utilization, as well as an understanding of employees on how to behave on social media, while representing the company. In alignment with the understanding of behavioral effects, the risk of accidentally passing company secrets arises.

Moreover, based on the collected data from the interview with Ericsson Labs, it becomes obvious that the challenge of vanishing or not prevailing platforms, as well as the subsequent loss of the user base and their data is recognized by the company.

Table 6.5 below summarizes the examined challenges for Ericsson Labs.

Table 6.5: Summary of Ericsson Labs’ challenges regarding social media  Content / Control  Leading in-depth discussions  Commitment  Time-intensive learning process  Passing of company secrets  Vanishing of platforms and user data  Headhunting

6.2.4 COMPANIES’ STRATEGIES TO DEAL WITH THESE CHALLENGES

For the purpose of reacting on negative feedback, the “Strategy of omnipresence” can be pursued by accepting the blurred boundaries between privacy and publicity. It follows the idea of “multilogging” instead of dialoging, which implies that interaction with the public is complex, overlapping and continuous. (Aula, 2010, p.48) This is consistent with Ericsson Labs’ attitude towards responding to any obtained feedback, since the collaboration with the public is part of its business model. Therefore, Ericsson Labs shares sensitive knowledge

92 with its community members and awaits new developments in turn, which can result in a continuous cooperation

In order to lead in-depth discussions with a specific target group, Ericsson Labs keeps on inviting the concerned people, most likely key partners and experts, to personal interviews and meetings on a face-to-face basis, as this allows them to amplify relevant topics and exchange more specific information without any disturbances.

As the commitment of employees is a necessity to successfully utilize social media, Ericsson Labs does not directly appoint the responsibility for social media activities to employees regarding their job description, but selects enthusiastic, mostly younger and technological experienced people. This selection criterion also shortens the time-consuming learning process, since these technology-eager employees already bring along certain knowledge about social media and do not need basic instructions. To ensure a suitable behavioral representation of the company by employees on social media, as well as to overcome the threat of passing company secrets, Ericsson introduced a corporate netiquette, proposing to steadily reconsider why something is done.

Due to the fact that social media platforms might disappear as quickly as they became popular, Ericsson Labs selected their used utilized applications by firstly determining the desired features and secondly by choosing the market leading provider. A steady observation and analysis of trends and developments helps the company to adapt in a timely manner. As reinsurance to a possible loss of user data in case of a vanishing social media platform, most published content redirects users to Ericsson Labs’ website and their own developer community, where visitors are able to register, enabling the company to store data independently.

Although Mr. Minde clarified the risk of headhunting Ericsson Labs has to face especially in professional social networks, no particular strategy to avoid this exists, making this risk inevitable.

The above clarified strategies to overcome the respective risks and challenges are summarized in table 6.6 below.

Table 6.6: Summary of Ericsson Labs’ strategies regarding their social media challenges Challenges Strategies  Content / Control  Strategy of omnipresence  Leading in-depth discussions  Personal face-to-face meetings  Commitment  Selection of enthusiastic employees  Netiquette  Time-intensive learning process  Employees with technological basic knowledge  Passing of company secrets  Netiquette  Vanishing of platforms and user data  Continuous observation of developments  Establish own community  Headhunting N/A

6.3 WITHIN-CASE ANALYSIS: CASE C – SONY PICTURES HOME ENTERTAINMENT GMBH

6.3.1 TYPES OF SOCIAL MEDIA USED BY COMPANIES IN DIFFERENT VALUE CHAIN ACTIVITIES

Like in the previous within-case analysis, the utilized social medial tools by SPHE, as observed and mentioned by Andreas Bork, are categorized according to Kaplan’s and Haenlein’s (2010) classification scheme:

 Blogs: Twitter, Fan blogs (indirectly)  Collaborative projects: Amazon, iTunes (customer evaluations) Wikis Monster.de, StepStone.de (job markets)  Social networking sites: Facebook, Xing, Google+  Content communities: YouTube, MyVideo.de  Others: SharePoint

SharePoint is a collection of software from Microsoft, allowing different internal applications, as for example internal communication, collaboration or data sharing. As this comprises various different functions, similar to classical social media, but is rather a software bundle with various applications, it is classed as “others”. (SharePoint, s.a.)

Since SPHE is part of the entertainment industry, social media is primarily used for marketing purposes. SPHE posts exclusive content, like sneak previews, trailers and interviews related to its movies, as well as releases and special offers of its products from the affiliated online stores Amazon and iTunes on Facebook and Twitter. To be able to post motion picture material like trailers, SPHE is present at the video sharing, respectively streaming, sites YouTube and MyVideo.de, which are also often embedded on Facebook and Twitter.

In regard to the support activity human resource management, Mr. Bork stated that a company profile exists on Xing, but is rarely used for recruitment. Additionally, SPHE makes use of internal Wikis and SharePoint for internal communication. Besides distributing the company’s products, the evaluation and review opportunity from the online stores Amazon and iTunes are utilized to analyze feedback for service, respectively CRM purposes. Table 6.7 shows a summary of the various applied social media types in the primary and supporting activities of SPHE.

Table 6.7: Used types of social media in SPHE’s value-chain activities

Firm Infrastructure Firm HRM TechnologyDevelopment Procurement Logistics Operations Marketing Sales & Service/ CRM Blogs x Collaborative Projects x x x Social networking sites x x Content communities x Virtual social worlds Virtual game worlds others x

6.3.2 PERCEIVED BENEFITS OF USING SOCIAL MEDIA FOR COMPANIES

SPHE utilizes, concerning the support activity firm infrastructure, internal wikis to gather information, as well as SharePoint. Due to the sensitivity of this information, no detailed description of SPHE’s usage of SharePoint was elucidated.

In terms of human resource management, SPHE is posting job offerings and internship positions on job markets and furthermore, occasionally promotes open internship positions on Twitter and their social network presences.

According to Mr. Bork, the potential of social media to reach out to and communicate with millions of possible customers is the main benefit. Therefore, SPHE posts on Facebook and on Twitter to promote and create a buzz about upcoming movies, as well as current product offers of the affiliated online stores Amazon and iTunes to initiate actual sales. The mentioned review systems of these stores are used to analyze feedback concerning the hardware and quality of the offered products and to detect failures for future improvements. Since SPHE’s products are emotional and can originate whole fan cultures, social media platforms, like Facebook, and microblogs, like Twitter, with huge user bases are very advantageous to expand such cultures and subsequently create further awareness about the products. Established fan groups or blogs in regard to specific movies or actors, which are independently from SPHE managed by fans, are also provided with high quality pictures and other content from SPHE’s press portal. Andreas Bork added the benefit of targeting

customers more directly and therefore more efficiently to establish or strengthen already existing bonds between the customers and the products.

Figure 6.4 below summarizes how SPHE uses social media to facilitate value chain activities.

FIRM HUMAN RESOURCE TECHNOLOGY PROCUREMENT INFRASTRUCTURE MANAGEMENT DEVELOPMENT

 Internal  Recruitment communication

 Internal information gathering

Support Activities Support

IN-/OUTBOUND OPERATIONS MARKETING & SERVICE LOGISTICS SALES

 Promotion  Consider negative feedback to Directly reach out to detect technical failures early audience  Customer engagement by Promote Products,

Activities continuously providing Events exciting content on popular platforms  Sales: Initiation of sales by

Primary Primary linking to stores

Figure 6.4: Social media utilization of SPHE in regard to their value-chain

6.3.3 CHALLENGES FACED BY COMPANIES USING SOCIAL MEDIA

In an analogous manner as before, considered challenges and risks for SPHE concerning their social media implementation and utilization will be investigated.

As a vital part of the representation of a company on social media platforms, Mr. Bork mentioned the continuous provision of exciting and creative content, appropriate to the user bases’ interests and desires, related to the theoretically defined challenge of commitment. In order to fulfill this in a successful manner, a lot of time and manpower has to be invested, correlating to costs, as well as basic knowledge and experience has to be gained, usually accompanied by a time-intensive learning process.

Besides the active content provision, it is also necessary to be informed about current trends and developments of social media platforms, in case one might experience a decrease in popularity and become irrelevant for the target group. If this occurs, Mr. Bork mentioned the risk of losing the invested time and money to obtain a lot of subscribers, as well as its accompanied data.

Although it was not precisely mentioned as a challenge, Mr. Bork stated that SPHE is subject to negative feedback and deconstructive criticism, especially on their affiliated online stores, what can be associated with the risk of losing control over the content, according to Aula (2010 p. 44).

Baird and Parasnis (2011b, p. 9) explained the challenge of establishing a ROI strategy for social media activities with the non-existence of a consensus about what and how to measure. Mr. Bork affirmed this, as he elaborated the difficulty of measuring the non- monetary benefits of these activities compared to traditional marketing tools, because the usual utilized formula for such a return on investment is not applicable.

Furthermore, Mr. Bork exemplified that the industry in which SPHE is present, is heavily exposed to piracy, in forms of illegal distribution and downloading of movies and TV series. This becomes even a bigger challenge for companies from the movie industry, which are present on social media platforms and utilize them for promotional issues, as on these platforms a huge part of the user base is from a generation, which grew up with the Internet. These users often have a very good knowledge about the Internet, and therefore also know how to utilize various possibilities to download movies illegally, after their desire to watch it was sharpened by the organizational promotion efforts.

In alignment with the risk of illegal distribution of data, the risk of being subjected to data security issues caused by hacker attacks arises. Especially, if a company utilizes any type of social media connected to the Internet for the purpose of exchanging internal information, it is exposed to the threat of interception, where unauthorized people force access to this data by technical means. (Jung, Han & Lee, 2001, p. 489)

Table 6.8 below displays a summary of the challenges SPHE associates with the organizational usage of social media.

Table 6.8: Summary of SPHE’s challenges regarding social media  Commitment  Time-intensive learning process  Content / Control  ROI Measurement  Piracy issues  Data Security  Vanishing of platforms and user data

6.3.4 COMPANIES’ STRATEGIES TO DEAL WITH THESE CHALLENGES

The previously determined challenge of the required high commitment to social media and the steady provision of content, as well as the learning process to gain a basic understanding of the social media utilization, dictates a lot of manpower and is very time-consuming. For the purpose of dealing with these two challenges, SPHE engages two external marketing agencies, which are responsible for the execution of the company’s social media activities in terms of marketing and promotion. By setting clear objectives and briefing the external agencies about the desired results of their social media appearances, the company’s internal expenditures in means of manpower and time are reduced.

In order to deal with negative feedback and criticism, SPHE pursues a strategy of attendance by not directly responding to the audience, but taking the given feedback, especially regarding hardware failures, into consideration.

To measure the success of the marketing activities performed on social media platforms, the company is mainly able to quantify their impact on the online behavior of customers in terms of sales numbers on the respective online stores like Amazon and iTunes, or by conducting analysis tools, which register click rates and facilitate the tracking of marketing activities.

In order to deal with piracy issues, SPHE itself tries to create and improve legal offers constantly to become more attractive for their target groups. Besides that, the company relies on institutions like the GVU, which pursues offenders on a legal basis. For the purpose of avoiding the interception of data in regard to internal communication, SPHE does not exchange internal information on external online platforms.

As the possible vanishing and loss of importance of social media platforms can be considered as ever-present, and subsequently, the company is facing the risk of losing an entire user-base and its data, SPHE and the responsible marketing agencies are continuously observing the social media world to recognize trends and developments at an early stage. In addition to the observation, SPHE considers enquiries, in which fans ask for content to publish on their own blog or fan group. Thereby, information can be gained about which platforms are used by their fans, as they are more often closer to trends than the company. To avoid a total loss of user data, SPHE offers the possibility of subscribing to newsletters, which enables the company to at least store a share of data, concerning their users, independently.

For the purpose of providing a better overview about SPHE’s strategic decisions, table 6.9 below summarizes the challenges and respective strategies to deal with them.

Table 6.9: Summary of SPHE’s strategies regarding their social media challenges Challenges Strategies  Commitment  Outsourcing to external marketing agencies  Time-intensive learning process  Outsourcing to external marketing agencies  Content / Control  Strategy of attendance  Measurement  Analysis tools  Piracy  Improve legal offers  Engage legal institutions  Data Security  Neglect online platforms for internal communication  Vanishing of platforms and user data  Continuous observation of developments  Establish own services like newsletters  Consider information from user enquiries

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6.4 WITHIN-CASE ANALYSIS: CASE D – RUD KETTEN RIEGER & DIETZ GMBH & CO. KG

6.4.1 TYPES OF SOCIAL MEDIA USED BY COMPANIES IN DIFFERENT VALUE CHAIN ACTIVITIES

A closer look at the different types of social media utilized by RUD in alignment with the classification scheme will be taken and subsequently, their application in regard to Porter’s value chain will be investigated on the basis of the information obtained from the interview with Mr. Goetz.

 Collaborative projects: RUD Secure Collaboration Portal Customers’ portal sites  Others: RUD’s intranet

As RUD is doing business mostly in a B2B, respectively B2G context, they do not utilize platforms considered for a huge audience.

In regard to Kaplan’s and Haenlein’s classification characteristics, we classed the RUD Secure Collaboration Portal as “Collaborative project” as it is characterized by a rather low degree of self-presentation/self-disclosure as well as a low degree of social presence and media richness, as access is only granted to particular customers and employees. Even if RUD’s intranet fulfills some basic characteristics and features of social media, as for example the information exchange among employees, it is hard to classify it regarding the two dimensions and is therefore classed as “others”.

While the RUD Secure Collaboration Portal is basically a platform for existing and potential customers to get information related to RUD’s products, as well as to place orders, it is mainly used in the primary activity marketing and sale, as well as for service or CRM activities. In alignment with this, customers’ own web portals are taken into consideration concerning marketing and sales. The intranet is fulfilling firm infrastructure purposes by offering possibilities of internal communication. The different types of utilized social media, linked to the respective activities of the company’s value chain, are summarized below in table 6.10.

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Table 6.10: Used types of social media in RUD’s value-chain activities

Firm Infrastructure Firm HRM TechnologyDevelopment Procurement Logistics Operations Marketing Sales & Service/ CRM Blogs Collaborative Projects x x Social networking sites Content communities Virtual social worlds Virtual game worlds others x

6.4.2 PERCEIVED BENEFITS OF USING SOCIAL MEDIA FOR COMPANIES

The company uses social media mainly to support its firm infrastructure. RUD’s intranet is particularly used to facilitate the communication among employees, exchange information more efficiently and connect the subsidiaries abroad to support their management.

The RUD Secure Collaboration Portal is especially beneficial in the sales area as the placement of orders and its process occur automatically, which saves time because of less paper work and reduces the amount of required staff. As mentioned above, access is only granted to particular customers, which assists to reach out to the target group directly and keep in touch with it. Moreover, the portal provides tools, which help to determine product specifications and subsequently suggest suitable offerings in addition to further general information for customers. These features facilitate the exchange of information and support the customer in his order procedure, which improves RUD’s general Service, respectively CRM.

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Figure 6.5 below displays a summary of RUD’s utilization of social media concerning different tasks of their value chain activities.

FIRM HUMAN RESOURCE TECHNOLOGY PROCUREMENT INFRASTRUCTURE MANAGEMENT DEVELOPMENT

 Internal communication

 Internal information gathering

Support Activities Support

IN-/OUTBOUND OPERATIONS MARKETING & SERVICE LOGISTICS SALES

 Promotion  Tools facilitating order procedure Directly reach out to audience

 Sales: Activities Initiation of sales

Automated order processing Primary Primary Keep in touch with partners

Figure 6.5: Social media utilization of RUD in regard to their value-chain

6.4.3 CHALLENGES FACED BY COMPANIES USING SOCIAL MEDIA

Although RUD is not as present as other companies on social media, the company is aware of various risks and challenges concerned with this new way of communication and interactivity. The main challenge for RUD is based on its business objective and product range, as the company mainly provides expensive products for industrial purposes to other companies or state institutions. As most social networks are more intended for the public, the audience does not really comprise these target groups.

The data from the interview furthermore revealed that the company is aware of the information overload on these platforms, as users tend to post a lot of irrelevant information and comments, what makes it hard to sort out the important contributions. This challenge can

103 also be present on the company’s intranet, when employees contribute suggestions and solutions to problems, without the required topic related knowhow.

The implementation and utilization of social media is associated with a time-consuming learning process and furthermore requires a high degree of commitment by the employees, which might be a major challenge for the company if they decide to use social media to a greater extent.

Furthermore, data security issues are familiar to RUD, as the company and its representatives are aware of the risk of data interception, if internal information is passed along on the Internet.

Table 6.11: Summary of RUD’s challenges regarding social media  Commitment  Time-intensive learning process  Targeting of specific segments  Information overload  Data Security

6.4.4 COMPANIES’ STRATEGIES TO DEAL WITH THESE CHALLENGES

The first four challenges determined above, namely commitment, the time-intensive learning process, the targeting of specific segments, in the case of RUD companies and state institutions, as well as the information overload are the major reasons why RUD avoids social media in means of public platforms with a huge audience so far. RUD sees no need to develop strategies to deal with the time-intensive learning process and required commitment of employees so far, as their target audience deriving from a B2B and B2G context is simply not present on most social network platforms by now. Although some companies are interacting with others on social networking platforms, they do most often not belong to their potential clientele, as RUD’s expensive products are very unique and usually not requested by the average social media user.

The challenge of information overload, which derives from a lot of unnecessary irrelevant contributions by users, exists for RUD internally, as well as externally. The huge amount of external information deters the company additionally from expanding their social media activities. RUD overcomes the challenge of internal information overload on their intranet, caused by contributions made by employees leaking the required specific knowledge, by

104 granting access to sections of their intranet platform in respect to the employees’ responsibilities. This enables the company to ensure that only people, who are proficient in a specific area, share their thoughts about a related topic and that the amount of false information is reduced.

For the purpose of not being exposed to the risk of data interception by unauthorized people, the company handles their internal communication via its intranet, as well as via classical communication forms, like personal meetings or telephone calls. RUD’s intranet also connects the subsidiaries in the entire world with each other in a peer to peer network. As a consequence, it is not accessible from the Internet and therefore the risk of data interception is reduced.

RUD’s strategies to deal with recognized challenges and risks are displayed below in table 6.12.

Table 6.12: Summary of RUD’s strategies regarding their social media challenges Challenges Strategies  Commitment  Avoidance of social media  Time-intensive learning process  Avoidance of social media  Targeting of specific segments  Avoidance of social media  Information overload  Avoidance of social media  Limited access to intranet areas  Data Security  Neglect online platforms for internal communication

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6.5 CROSS-CASE ANALYSIS

After every case was analyzed isolated, the results of the within-case analyses are compared to each other in respect to the research questions, for the purpose of examining differences and similarities. Subsequent to the comparison of the utilized types of social media, all primary and support activities of Porter’s value chain will be investigated individually to reveal unexploited potentials. By contrasting the determined challenges and strategies, a general view of well recognized challenges and risks, as well as applicable methods to deal with these will be provided.

6.5.1 TYPES OF SOCIAL MEDIA USED BY COMPANIES IN DIFFERENT VALUE CHAIN ACTIVITIES

According to Kaplan’s and Haenlein’s (2010) classification scheme for different types of social media, the utilized tools of each company will be compared in table 6.13 below, followed by an investigation of the applied platforms and providers.

Table 6.13: Comparison of different utilized social media types

Blogs Collaborativeprojects Networking Social Sites Contentcommunities social Virtual worlds Virtual gameworlds others Case A x x x x x Case B x x x x Case C x x x x x Case D x x

As table 6.13 above reveals, blogs, collaborative projects, social networking sites, as well as content communities are utilized in Case A, Case B and Case C. Case D differs from the other companies, as the company does not use social media as actively as they do. Furthermore, except of Case B, all companies utilize tools or software related to social media, classed as “others”.

Regarding blogs, the within-case analyses showed that Twitter is used for micro-blogging purposes by all companies, using this type of social media. In addition to this, Case B

106 operates its own blog on its website, as well as the social bookmarking tool Delicious. Case C indirectly takes advantage of blogs independently operated by fans.

Without any exception, every company utilizes and operates collaborative projects, although the providers and purposes vary. Between Case A and Case C similarities in used tools can be determined, as both companies are present on job markets, like Monster.de and StepStone.de, as well as they consider customer evaluations on affiliated online stores, like Amazon and iTunes. Furthermore, Case B and Case C have the opportunity to exchange information and knowledge internally in wikis. Case B and Case D operate their own collaborative platforms, Ericsson Labs’ developer community and RUD’s Secure Collaboration Portal, which are primarily customer-focused.

Unlike Case D, all companies are actively participating on social networking sites. For this purpose, they are all present on Facebook, as well as on professional networks like Xing, which is favored by companies located in Germany, or LinkedIn, which is more international. Moreover, only Case A is still partly utilizing MySpace. This can be referred to the past efforts of the music industry towards this social network. Case B furthermore operates an internal social network, provided by IBM, in order to connect employees.

Case A, Case B and Case C also use content communities, especially YouTube, in order to provide content for their audiences. Similarities in Case A and Case C can be determined, as both companies use various video sharing platforms in order to promote their products. In exception to audiovisual content communities, Case B utilizes SlideShare, as it enables the company to provide presentations to its users.

A noticeable similarity can be recognized regarding the presence in virtual social worlds and virtual game worlds, as according to the data obtained from the interviews, no company is actively exploiting these opportunities.

In addition to the basic six types of social media, all companies besides Case B utilize other, hybrid forms, which comprise individual features of social media, as for example Spotify, Microsoft SharePoint or an intranet, providing social media like possibilities.

Based on the utilized types of social media described above, table 6.14 below displays a summary of their respective application in Porter’s value chain activities.

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Table 6.14: Comparison of utilized social media types in Porter’s value chain activities

Firm Infrastructure Firm HRM TechnologyDevelopment Procurement Logistics Operations Marketing Sales & Service/ CRM Blogs x x Collaborative Projects x x Case A Social networking sites x x Content communities x others x x x Blogs x x Collaborative Projects Case B x x x x Social networking sites x x x x Content communities x Blogs x Collaborative Projects x x x Case C Social networking sites x x Content communities x others x Collaborative Projects Case D x x others x

Since Case D can be determined as an exceptional case, due to the fact that the company barely utilizes social media, similarities and differences will only be examined among Case A, Case B and Case C. However, regarding all companies, it becomes obvious that the classical six social media types, defined by Kaplan and Haenlein (2010), are not used within logistics and operations, although company A utilizes other hybrid tools to automatically provide digital content, yielding profits, as clarified in the within-case analysis.

As investigated in the within-case analysis of Case A, the company has an intranet platform, but does not really use it actively in alignment with the support activity firm infrastructure, as the company considers itself as too small for an effective usage and prefers personal communication. Case B and Case C, both use collaborative projects, as well as an internal social network site, respectively internal social software provided by third parties.

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All three companies utilize social networking sites either actively or passively for HRM purposes. While collaborative projects are used in the same manner in Case A and Case C, blogs are only applied by company A to support HRM.

In Case B, the company’s business purpose is mainly focusing on the research and development of new services and products. That is why the company is the only one taking advantage of their own collaborative project, the developer community, concerning the support activity technology development and partly for procurement matters.

Table 6.14 above, clearly exemplifies that most social media tools are especially utilized in the field of marketing and sales. All companies use blogs, social networking sites, as well as content communities to promote their offers or to initiate sales, but neglect the application of collaborative projects in this primary activity.

Nevertheless, the comparison highlights the importance of collaborative projects concerning service or CRM, as in all cases, this type of social media is utilized. In addition to this, Case B makes use of blogs and social networking sites and their features for these matters.

6.5.2 PERCEIVED BENEFITS OF USING SOCIAL MEDIA FOR COMPANIES

In the following section of this chapter, all activities in which social media are applied will be compared isolated with the theory from the frame of reference, providing a good overview on tasks, which can be facilitated or supported by these new tools for communication and collaboration and revealing unexploited opportunities.

6.5.2.1 FIRM INFRASTRUCTURE

According to Porter (1998, p. 43), the support activity firm infrastructure comprises a number of activities affecting the entire value chain, which can be facilitated by social media in terms of knowledge and information exchange. (Cyganski & Hass, 2008, p. 109, own translation)

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Table 6.15: Comparison of perceived benefits in the value chain activity firm infrastructure Theory Case A Case B Case C Case D

 Simplify / Improve  Existing, but barely  Internal  Internal  Internal knowledge and used possibilities communication communication communication information for internal exchange communication  Internal information  Internal information  Internal information gathering gathering gathering  Initiation of cooperation  Internal feedback through mutual on Projects and contacting, specific Ideas searches, information sharing

By taking a closer look at table 6.15 above, the theoretical defined opportunity of simplifying and improving the information and knowledge exchange is present in all cases, as internal or cooperation wide platforms for this purpose exist. Except of Case A, all companies exploit this opportunity, as it makes it easier and faster to communicate with co-workers virtually. In Case B, namely Ericsson Labs’, the internal social network furthermore provides the opportunity to swap ideas on new projects among all collaborators, which can partly be considered as an initiation of cooperation. Nevertheless, the opportunity of specific searches for employees, in order to form groups and subsequently cooperate is not used by the sampled companies.

6.5.2.2 HUMAN RESOURCE MANAGEMENT

In alignment with Ronald Ebert’s definition of HRM (2012, p.194), summarizing it as a “set of organizational activities directed at attracting, developing and maintaining an effective workforce”, various tasks can be facilitated by social media, as the theory chapter revealed. Table 6.16 below compares the findings of each case with the theoretical opportunities to detect similarities or differences, as well as unused potentials.

Table 6.16: Comparison of perceived benefits in the value chain activity HRM Theory Case A Case B Case C Case D

 General  Recruitment  Initiation of  Recruitment communication applications by  Recruitment and users Evaluation  “Onboarding”  Task allocation  Alumni  Training and development support

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The data gathered from the interviews, as well as the respective within-case analyses showed that social media is merely used for recruitment purposes. Only in Case A and Case C, the companies actively promote job offers on their social networking accounts and in their blogs. Both furthermore utilize collaborative projects, in terms of online job markets, like Monster.de or StepStone.de. In Case B, no direct announcements concerning vacant posts are made, but users of its social media presences submit initiative applications, deriving from their awoken interest in the company. Besides the possibility to initiate and facilitate the recruitment process, none of the sampled companies exploits any other opportunity of social media in the field of human resources.

6.5.2.3 TECHNOLOGY DEVELOPMENT

The support activity technology development, often referred to as research and development, is according to Porter (1998, p. 42) concerned with the development of new ideas, products, services and processes. Opportunities of utilizing social media, in order to simplify tasks within this activity are most often based on collaboration with partners. (Cyganski & Hass, 2008, p. 107, own translation)

Due to the fact that the companies in Case A, as well as Case C, are not responsible for the actual creation of products, but rather concerned with their marketing and distribution, social media is not directly utilized in this field. Only Company B, which is working closely with its community to develop new products, services and technologies, applies social media for research and development purposes, as to mention general communication, information gathering, knowledge exchange, collaboration and concept or product testing.

6.5.2.4 PROCUREMENT

Procurement, the fourth support activity of Porter’s value chain, is associated with the function of purchasing inputs and comprises five steps, as to mention information gathering, supplier contact, contracting, requisitioning and intelligence/analysis. (Porter, 1998, p. 41) (Quesada, González, Mueller & Mueller, 2010, p. 519)

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Alike the utilization of social media in technology development, only in Case B, the company takes occasionally advantage of their platform for procurement purposes. Among the user base of its developer community some suppliers can be found and subsequently future partnerships can be initiated.

6.5.2.5 LOGISTICS

Logistics, which is originally divided by Porter (1998, p. 37) into inbound and outbound logistics, basically describes the product flow within an organization, passing through several stages of transformation, and the subsequent delivery to its destination. (Skjøtt-Larsen et al., 2007, p.22)

As previously explained in the within-case analysis of company A, the automated uploading of files and video content, can be considered as logistics in a broader sense, as the company yields profits on streamed audio and video files. Besides this exception, no utilization of social media for logistical purposes was ascertained.

6.5.2.6 OPERATIONS

Regarding Hill and Jones (2010, p. 82), the primary activity operations is considered as production, which is concerned with the actual creation of goods and services. As investigated in the previous section of this chapter, none of the sampled companies utilize social media for the purpose of facilitating production related tasks and activities.

6.5.2.7 MARKETING AND SALES

The broad spectrum of the primary activity marketing and sales is, according to Porter (1998, p. 40), concerned with “providing a means by which buyers can purchase the products and inducing them to do so”. This activity comprises tasks regarding the creation of offerings, advertising, promotion and public relations, as well as the sales process. (Weis, 2009, p. 33, own translation)

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Within all of these tasks, social media can be utilized and can have a major impact. Table 6.17 below displays a comparison of all cases with the fields of application determined by the theory.

Table 6.17: Comparison of perceived benefits in the value chain activity marketing and sales Theory Case A Case B Case C Case D

 Product:  More customer- More customer- focused focused development development, trend recognition

 Promotion:  Directly reach out  Directly reach out  Directly reach out  Directly reach out Directly reach out to to audience to audience to audience to audience audience, promote word-of-mouth  Promote word-of-  Promote  Promote mouth Products, Events, Products, Events Developments

 Sales:  Initiation of sales  Initiation of sales  Initiation of sales Keep-in-touch with by linking to stores by linking to partners, sales stores  Automated order channels, initiation  Earnings on processing of sales or future streamed audio

collaboration and video content  Keep in touch with partners

Solely company B exploits the opportunity of using social media for product or service related tasks by considering its users’ feedback to develop new customer-focused offerings. As far as the promotional part of this activity is concerned, it can be recognized that all companies are aware of the opportunity to directly reach out to their desired audience by utilizing different types of social media. Besides Case D, it furthermore becomes obvious that the companies make use of social media platforms, in order to promote their products or services. By providing interesting and exciting content, company A tries to actively promote word-of-mouth, respectively pursues the goal of content going viral.

Regarding the sales process and its fields of application for social media, all companies except of Case B initiate sales on their adapted platforms, either directly or indirectly by providing links to affiliated online stores, where the promoted products can be purchased. In Case A, the company can earn money on streamed audio and video content, which is often embedded on their social media presences. In a wider sense, this can be considered as actual sales. Unlike the others cases, Case D operates its own platform for sales purposes, what enables the company to automatically process orders and to keep in touch with partners and former customers.

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6.5.2.8 SERVICE / CRM

The fourth primary activity of Porter’s value chain is service, which is basically defined as “activities associated with providing service to enhance or maintain the value of the product, such as installation, repair, training, parts supply, and product adjustment”. (Porter, 1998, p. 40) Due to the fact that companies shifted from a product-oriented perspective to a more customer-oriented one, this activity can rather be described in terms of CRM, which can be considered as a business strategy to acquire and enhance relationships with customers in order to maximize their long-term value and to create customer loyalty. (Fjermstad & Romano JR., 2006, p. viii)

In table 6.18 below, a comparison of the utilization of social media concerning CRM by all sampled companies with the theoretically defined fields of application will be displayed.

Table 6.18: Comparison of perceived benefits in the value chain activity service or CRM Theory Case A Case B Case C Case D

 Customer  Customer  Customer  Customer  Tools facilitating engagement engagement by engagement engagement by order procedure continuously continuously providing exciting providing exciting  Direct dialogue  Direct dialogue content on popular content on popular platforms platforms  More customer  More customer insight  Consider negative insight  Consider negative feedback to feedback to detect technical detect technical failures early failures early

All cases show a quite similar utilization of social media for service or CRM purposes, besides company D, which mainly exploits its platform to facilitate the order procedure for customers. Case A and Case C use social media in the same manner and engage their customers by providing exciting content, whereas company C offers technology and information for customers to develop something on their own. Furthermore, the companies A, B and C mention to consider negative feedback to detect technical failures, but only company C actually makes use of the direct dialogue, as it tries to answer to every feedback in order to gain further customer insights to improve its products and services.

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6.5.3 CHALLENGES FACED BY COMPANIES USING SOCIAL MEDIA

As the study conducted by the IBM Institute for Business Value Analysis revealed, companies, respectively their CEOs, associate a number of risks and challenges with the implementation and utilization of social media in an organizational context. (Baird & Parasnis, 2011b, p. 9) In alignment with this study, a comparison of challenges, recognized by the sampled companies, with the theory will be displayed in table 6.19 below. The theoretically defined risks and challenges are furthermore expanded with the ones mentioned by the companies, in order to reveal similarities and differences in their recognition. Subsequently, challenges brought up in more than one case will be examined.

Table 6.19: Comparison of challenges faced by companies regarding social media

Case A Case B Case C Case D Case Content/Control x x x Commitment x x x x Information Overload x Competition Data Security x x Headhunting x ROI Measurement x Time-intensive learning process x x x x Vanishing of platforms and user data x x x New social media tools and changing structures x Targeting of specific segments x x Piracy x x Leading in-depth discussions x Passing of company secrets x

As the table above reveals, the recognition and awareness of challenges varies greatly between the different cases. However, all companies consider the required commitment of employees and the organization itself as a major challenge for the successful usage of social media platforms. Companies continuously need to provide content, desired by their audience, in order to keep them entertained and interested. A further challenge, which all companies are aware of, is the time-intensive learning process concerning social media. In all cases, the interviewees stated that especially during the implementation, but also afterwards, employees have to gain certain knowledge about the respective media, as well as about their personal behavior and its impact.

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Except of Case D, which is not making use of public accessible social media with a huge audience, all companies are aware of the challenge of vanishing platforms. This challenge is consequently linked to a loss of the previously established user base and the users’ data.

The challenge of losing control over content and user comments derives from the freedom of speech and the fact that a lot of contributions on social networking sites are often initiated by the customers and not the company. (Cyganski & Hass, 2008, p.115, own translation) Information about the company spread by users, either right or wrong, can create a public image, varying greatly from the “company’s own idea of what it is”. (Aula, 2010, p. 45) This challenge was mentioned exclusively in Case A and Case B, but was mainly referred to negative feedback and comments on products and services.

Company A and company D additionally consider it as a challenge to target a specific audience. In the case of company A, this challenge derives among others from target groups, which are not eligible to participate on social media networking sites, because of their age. In both cases this challenge also arises, as specific target groups are basically not existent or not as present, as to mention in Case A, people at the age of 50 and older, and in Case D, companies and state institutions.

Regarding piracy issues, similarities between Case A and Case C become obvious, as both face this problem in a same manner. This can be referred to their respective industry and product range, as both companies are concerned with the distribution and marketing of digital entertainment products. In Case C it was precisely stated that this challenge becomes intensified, as users on social media are often very technologically experienced and therefore aware of possibilities to obtain the desired products in an illegal way. Closely related to piracy issues, Case C, as well as Case D, are aware of data security issues, as internal company data might be intercepted by unauthorized people, if internal information is passed along on an online accessible platform.

Cyganski and Hass (2008, p. 115, own translation) furthermore brought up the theoretical challenge of internal competition, which might lead to a reduction of internal communication and collaboration, as employees might tend to keep back information for their own advantage. This challenge was not recognized by any of the interviewed companies.

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6.5.4 COMPANIES’ STRATEGIES TO DEAL WITH THESE CHALLENGES

In this section, a comparison between the sampled companies’ strategies to deal with the challenges they are facing will be conducted. To begin with, the challenges and risks compared in the previous section will be summarized in table 6.20 below, sorted by the number of indications, neglecting unique challenges. Subsequently, every challenge will be examined isolated and the respective strategies to deal with it will be investigated.

Table 6.20: Most significant challenges faced by companies in regard to social media

Case A Case B Case C Case D Case Commitment x x x x Time-intensive learning process x x x x Vanishing of platforms and user data x x x Content/Control x x x Data Security x x Targeting of specific segments x x Piracy x x

6.5.4.1 COMMITMENT

Commitment was considered as a challenge in all four cases and is basically concerned with the employees’ willingness to actively participate on social media for business purposes, as well as to behave adequately, while representing the company online. (Baird & Parasnis, 2011b, p. 12) The strategies applied by the sampled companies to deal with this challenge are displayed below in table 6.21.

Table 6.21: Strategies to deal with the challenge concerning commitment Case A  Support by management  Netiquette Case B  Selection of enthusiastic employees  Netiquette Case C  Outsourcing to external marketing agencies Case D  Avoidance of social media

As revealed in the table above, all companies pursue different strategies to deal with the required commitment of employees. While company A tries to support their employees by

117 briefing product managers about recent developments, which subsequently pass the information to their co-workers, company B already tries to overcome this threat in an earlier stage. The company puts only employees in charge of handling social media, which are enthusiastic and technological experienced. In both Cases A and B, the companies have a contractual netiquette, providing guidelines for employees on how to behave on social media in an organizational context.

In Case C, the company tries to bypass this challenge by outsourcing their social media related tasks to external agencies, which handle all efforts on their own, after a briefing by company C. Case D, which is so far not exploiting social media to a great extent, is aware of this challenge and pinpoints this as a considerable reason for it to avoid the utilization of social media by now.

6.5.4.2 TIME-INTENSIVE LEARNING PROCESS

Although this challenge was not clarified in the reviewed theory, all four companies associate a time-intensive learning process with the implementation and utilization of social media. This learning process, according to the interviewees, is additionally linked to a certain amount of required manpower and consequently costs.

Table 6.22: Strategies to deal with the time-intensive learning process Case A  Training in smaller cells Case B  Employees with technological basic knowledge Case C  Outsourcing to external marketing agencies Case D  Avoidance of social media

As it can be seen in table 6.22 above, all sampled companies have a different approach to overcome the challenge of a time-intensive learning process. While in Case C and D, both companies stick to their strategies of outsourcing or avoidance of social media and are therefore not directly subjected to the challenge, Case A and B apply different policies.

In Case A, the company tries to reduce the investment of time, manpower and money by training their employees not organization wide, but in smaller cells, as this makes it easier and faster to pass information and exchange knowledge directly. Company B pursues to overcome this risk again in an early stage, as the responsible employees, dealing with social media, have been selected among others on their technological basic knowledge and experience, what makes an intensive training redundant.

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6.5.4.3 VANISHING OF PLATFORMS AND USER DATA

The vanishing of platforms and their user data was also not detected in the reviewed theory, but is still recognized by three of the four interviewed companies. The respondent of Case A elaborated this challenge very well by mentioning the example of MySpace, which was one of the promising social networks until Facebook was launched. It experienced a strong decrease of popularity and the network itself with its registered users, including their data, basically vanished over the recent years, making the previously invested time and money to obtain these subscribers retrospectively unnecessary.

Table 6.23: Strategies to deal with the vanishing of platforms and user data Case A  Continuous observation of developments  Establish own communities Case B  Continuous observation of developments  Establish own community Case C  Continuous observation of developments  Establish own services like newsletters  Consider information from user enquiries

Table 6.23 above displays the different strategies of the three companies to deal with this challenge. It reveals that all provide some type of own service to collect and save customer data independently from the social media tools they use. The utilized social media platforms are observed continuously regarding their developments, to anticipate possible changes. Solely company B considers the information gained from users, who ask the company for promotion material to publish on their own blog or fan group. Thereby, information can be gained about the platforms used by their fans, which are more often closer to trends than the company.

6.5.4.4 CONTENT/CONTROL

The challenge of losing control over published content, particularly over comments and postings by users, is omnipresent on social media as, according to Baird and Parasnis (2011a, p.30), it is no longer the company, but the customers who are driving the conversation. Table 6.24 below shows the respective strategies of the companies, which are aware of this challenge.

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Table 6.24: Strategies to deal with the loss of control over content Case A  Strategy of attendance Case B  Strategy of omnipresence Case C  Strategy of attendance

Company A and C, who both face this challenge mainly in terms of negative feedback or deconstructive criticism on affiliated online stores, where their products are sold, pursue a strategy of attendance. This approach to a problem puts the company in the role of a listener, gathering and considering every kind of feedback and information, but not directly responding to their users. (Aula, 2010, p. 48) In contrast to the strategy of attendance in Case A and C, company B applies a strategy of omnipresence by interacting directly with the public and responding to their users, respectively on their feedback. (Aula, 2010, p. 48)

6.5.4.5 DATA SECURITY

In accordance to Steve Hawkins, David C. Yen and David C. Chou (2000, p. 142) a certain number of Internet users try to steal information or data from a company and use it for their own advantage. Although this is a major risk for companies, it was only particularly mentioned in Case C and D. The companies’ strategies to avoid the threat of unauthorized access to internal information and data, often referred to as interception, are displayed below in table 6.25.

Table 6.25: Strategies to deal with data security issues Case C  Neglect online platforms for internal communication Case D  Neglect online platforms for internal communication

In both cases, risks regarding data security were mainly associated with the interception of information passed along by employees online. That is why company C and company D strictly do not utilize online social media platforms to exchange any kind of internal issues between employees. Both companies make use of the basic intranet or other internally applied software, which is not connected to the Internet itself, but accessible peer-to-peer.

6.5.4.6 TARGETING OF SPECIFIC SEGMENTS

In contrast to the benefit of targeting customers directly, two respondents mentioned the challenge of targeting specific segments on social media, respectively social networks. In Case A the interviewee referred to the problem of reaching out to different age groups,

120 whereas in Case D, the appropriate audience regarding its unique products is not present on such platforms. To overcome this, they used different strategies, as shown in table 6.26 below.

Table 6.26: Strategies to deal with the challenge of specific targeting Case A  Usage of alternative tools Case D  Avoidance of social media

Company A utilizes alternative tools like newsletters or emails, preferred by people at the age of 50 and older, or provides chat rooms for the younger generations, which are all independent from social networks and their age limitations. Since the customers in Case D mainly consist of state institutions, which are simply not present on these platforms, the company does not see the necessity to engage in them and therefore neglects the possibility to promote its products on social media.

6.5.4.7 PIRACY

As a further challenge, which was not directly mentioned in the reviewed literature, the interviewees brought up online piracy. This threat is concerned with the illegal distribution in forms of downloading and uploading of company owned content without permission and can have a major impact on a company’s turnover. Piracy issues arise in the Cases A and C, as both companies are concerned with the distribution and promotion of digital entertainment products, namely audio and video files.

Table 6.27: Strategies to deal with the piracy issues Case A  Contractual deals with providers  Legal procedures Case C  Improve legal offers  Engage legal institutions

As it can be seen in table 6.27 above, both companies, A and C, are trying to deal with this challenge by enforcing legal procedures against offenders. Case C additionally tries to continuously improve their legal offers to entice customers away from illegal possibilities and make them aware of legal ways of purchasing the desired product. In Case A, the company is also subject to piracy issues to another extent, as the company faces the challenge of third-party uploads of their own content on content communities, like for example YouTube. To overcome this threat, the company tries to settle contractual deals with the respective providers, fixing property and earning rights.

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7 CONCLUSIONS AND IMPLICATIONS

In the final chapter of this thesis, conclusions will be drawn based on the previous analyses. The findings regarding each research question will be presented consecutively for the purpose of answering the research problem. Subsequently, managerial and theoretical implications will be revealed and recommendations for future researches will be made.

7.1 CONCLUSION

The purpose of this study was to determine the influence social media can have on companies’ activities along their value chain. By examining the findings in regard to the four research questions a better understanding of social media in an organizational context will be obtained.

7.1.1 RESEARCH QUESTION 1

Regarding the first research question, as stated below, similar characteristics will be assessed subsequently.

RQ 1: What types of social media do companies use in different value chain activities?

According to Kaplan and Haenlein (2010) social media can be classed in six different types, as to mention blogs, social networking sites, virtual social worlds, collaborative projects, content communities and virtual game worlds. Our research revealed that virtual social worlds, as well as virtual game worlds, were not used by the sampled companies. The remaining types were all utilized for different purposes, whereas in most cases the market leading platforms were applied, as to mention Facebook, as social networking site, Twitter, as blog, and YouTube, as content community.

Porter (1998, p. 37-38) divided a company’s value chain into primary activities, namely in- and outbound logistics, operations, marketing and sales, service and support activities, as to mention firm infrastructure, human resource management, technology development and procurement. Within all of these activities a competitive advantage can be gained. It became obvious in our research that most effort concerning social media was made towards its utilization in the primary activity marketing and sales, as well as for service, respectively CRM purposes. Furthermore, all companies provided opportunities for making use of social

122 media in terms of the support activity firm infrastructure. This study additionally showed that the sampled companies recognized and applied first possibilities to use social media for HRM matters, where social networking sites, especially professional networks, such as LinkedIn or Xing, are beneficial. The fields of application varied between the sampled companies to some extent, what can be referred to the fact that some of the companies do business in a B2C, others in a B2B and B2G context.

7.1.2 RESEARCH QUESTION 2

The first research question showed that numerous types of social media were used in different value chain activities. The subsequent question was defined to investigate the reasons for the companies’ social media engagement and posed as follows:

RQ 2: How can the perceived benefits of using social media for companies be described?

Considering the first support activity firm infrastructure, it became obvious that all sampled companies saw the benefit of facilitating the internal communication and information sharing by applying social media. One company had the required features, but did not use them, because of its small size, which lets us recognize that the size of an organization can be a determinant if social media are utilized for this area.

Regarding human resource management, the analysis showed that three of the four questioned companies were cautiously beginning to make use of social media in terms of recruiting or publishing job offers, but were still neglecting the remaining opportunities, as mentioned in the reviewed theory.

The potential of social media for the activity technology development was only recognized by one of the sampled companies, but the case of Ericsson Labs showed exactly in alignment with the theoretical benefits how it can be exploited.

In terms of procurement, the study revealed that the chosen cases were not aware of the, in theory detected, possibilities that social media can offer for this activity. Solely Ericsson Labs takes advantage of social media in a new way in this area, as it occasionally initiates its partnerships via the dialogue with users on its developer community.

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In the same manner, none of the sampled companies utilized social media in the ways described by theory in the fields of logistics, as only Sony Music Germany used it for automated uploading of files and video content.

Considering operations, only one of the questioned companies is actually engaged in this field and mentioned that the required information for this process would be too complex and company sensitive to exchange on any platform and is therefore usually discussed in face-to- face meetings.

Looking at the numerous activities and different types of social media used by the four cases for marketing and sales purposes, it is clearly evident that this is still seen as the most beneficial usage. Directly reaching out to the audience is the most appreciated benefit of utilizing social media, as all companies mentioned this advantage in order to attract the desired target group directly and therefore further customize the intended message towards them. Furthermore, three of the questioned companies named the advantage of promoting their products or events on social media to create awareness and to initiate word-of-mouth among the broad audience, present on such platforms. Regarding the specific target groups of these three companies, it was determined that they all act within a B2C context. That is why we draw the conclusion, with reservation because of the limited respondents, that this benefit is mainly addressed to this context instead of B2B or B2G organizations, as their audience is not yet present on these platforms. Moreover, we were able to detect the development of monetizing social media as the respondents of company A, C and D stated that they would use it to initiate sales. Company A even earns money directly on the streaming of uploaded material on content communities like YouTube or MyVideo.de.

The cross-case analysis revealed additionally that service, respectively CRM, is the second most common field where social media is applied, since all cases referred to an active utilization of different types. The companies A, B and C try to engage their customers in different ways, as described earlier, and at least consider the received feedback in order to detect product failures early. Solely in Case B, the direct dialogue is really encouraged by the company in order to clarify any possible misunderstandings and to obtain a deeper customer insight for possible product or service improvements. The interviewee in Case D stated that his company would do the same via personal key account managers instead of social media, but utilizes it to facilitate and automate the order procedure for customers. Concerning these differences, we draw the similar conclusion with the same reservations as above, referring to the different business environments of the companies, as well as to the specific and expensive products of company D, which require a personal treatment of the customers.

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7.1.3 RESEARCH QUESTION 3

The previously assessed research question 2 revealed recognized benefits. However, social media is continuously associated with arising challenges and risks during its implementation and utilization, as investigated with research question 3.

RQ 3: How can the challenges, faced by companies using social media, be characterized?

Besides the risks and challenges, which were clarified in the reviewed theory, all companies were aware of unmentioned risks. In every case the companies recognized that a huge commitment of employees is required to successfully operate social media for organizational purposes, what is often linked to time-intensive learning processes. The companies, which are doing business in a B2C context, were also aware of the risk of losing control over published content, comments and feedback. Additionally, the companies brought up the risk of vanishing platforms and the subsequent loss of user data as a major concern. Due to the fact that some challenges were very specific, as for example piracy, a dependency of challenges on the industry and the respective products or services was noticeable.

7.1.4 RESEARCH QUESTION 4

With the fourth research question, as stated below, we wanted to clarify the strategies of the sampled companies for dealing with the previously determined challenges and risks.

RQ 4: How can the companies’ strategies to deal with these challenges be described?

Similarities in the companies’ dealing with the probable loss of control over content could be perceived, as feedback concerning products and services were taken into consideration by all companies to recognize and remedy defects. Additionally, the companies, which were aware of vanishing platforms and a subsequent loss of user data, continually observe the market and its development, as well as offer own services to gather user data independently from social media platforms. As an approach to the challenge of required commitment and adequate behavior, two companies have an organizational netiquette, which can aid as a guideline for employees. Although, it was not mentioned by all companies precisely, the best way to obviate data security issues was ascertained as avoiding internal communication on online platforms.

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7.1.5 RESEARCH PROBLEM

The findings of the previous analyzed research questions will be summarized in order to provide a final conclusion and to answer our research problem as stated below.

How do social media influence companies’ activities along their value chain?

Within this study, we were able to collect interesting data concerning this topic and discovered some new aspects of the influence of social media on companies’ activities, which were not described in the reviewed theory. First of all, it was revealed that in most cases the market leading platforms for blogs, social networking sites, collaborative projects and content communities were applied differently to support the companies’ value chain activities. As mentioned in the research discussion, the focus of social media usage is still in the fields of marketing and sales to create awareness, but became similarly important for service, respectively CRM purposes to engage and communicate with customers. In addition, it was discovered that social media are used to a greater extent regarding the infrastructure of a firm in order to improve the internal communication in general. Furthermore, human resource management also experiences a development towards exploiting social media more with the emergence of business related social networks. Whereas the remaining activities are only partly influenced by social media, depending on the industry and business environment a company is acting in.

Although social media entail a lot of benefits for the organizational usage, the respondents are especially concerned about the challenges of the required extensive commitment of all responsible employees and the accompanying time-intensive learning processes. Furthermore, they brought up the fast paced and complex environment with the possible vanishing of used platforms and the subsequent loss of user data, as well as the loss of control over the communication with the customer. But despite the mentioned challenges and risks, all questioned companies outlined specific strategies to deal with them and stated that the most important tasks are to continuously observe the current developments, encourage their employees and simply accept negative feedback in order to exploit the potentials of social media successfully.

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7.2 MANAGERIAL IMPLICATIONS

In order to utilize social media in an organizational context successfully, it can be pinpointed with limitation to our sampled companies that before any actions are taken, a company should observe and analyze the social media platforms by taking the brought up challenges into consideration. Crucial points within this observation are the presence of the targeted audience, as well as the organizational structure of the company and if it enables a facilitation of information and knowledge exchange internally. These two factors seem to mainly depend on the respective industry and the company size, due to the fact that companies doing business in a B2B or B2G context and their customers are often not present on public social media platforms, as well as the fact that smaller companies do not necessarily need to communicate virtually.

After a company denominates a utilization of social media as promising, it has to consider that a lot of time has to be invested to gain knowledge about the respective media and about the impact of personal behavior, as well as it requires a lot of commitment of employees to provide continuously exciting content to the audience. If the company is unable to invest a certain amount of time, manpower and money to train their employees in these matters, it should consider consulting external marketing agencies. To teach employees about their personal behavior on social media when they represent the company, a netiquette could be introduced, providing behavioral guidelines.

As mentioned before, social media is a fast paced environment, which evolves quickly. Therefore, a company should continuously observe the market and its development to react within a narrow time frame on upcoming trends.

7.3 THEORETICAL IMPLICATIONS

Based on existing theory in the field of social media, as well as in regard to Porter’s value chain and its primary and support activities, a frame of reference could be established. It comprises the social media classification scheme, composed by Kaplan and Haenlein (2010), Porter’s value chain and theoretically examined risks, challenges and respective strategies to overcome these.

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By applying this conceptual framework to all cases, evidence was found, partly supporting the conceptual work of Petra Cyganski and Berthold Hass (2008), which reveals opportunities for an organizational usage of social media in various activities, as companies were utilizing this new way of communication, information exchange and collaboration in several activities. In addition to this, the companies were aware of a few risks and challenges mentioned by Cyganski and Hass (2008), even though further, not theoretically mentioned risks, were brought up by most companies, as to mention the vanishing of existing platforms and the subsequent loss of an entire user base or a time-intensive learning process associated with the implementation of social media. Some challenges, determined by Cyganski and Hass (2008), like the fact that internal competition among employees might hinder collaboration and information exchange, were not recognized at all.

As social media is a quick changing and evolving environment, we noticed several applications, which we considered as a hybrid form of social media applications, as they might comprise common features or simply make use of data, gathered from interlinked social networking platforms. These tools were not really classable in alignment with Kaplan’s and Haenlein’s (2010) classification scheme.

7.4 FUTURE RECOMMENDATIONS

This study mainly focused on the organizational point of view concerning social media and its utilization. Further research could be conducted in two directions. Due to a lack of time and therefore only a limited amount of conducted interviews, we would recommend collecting more data in the same way regarding the influence of social media on companies’ activities along their value chain. In terms of gathering data, it would be also worthwhile to include further companies from different business environments in order to make appropriate comparisons and generalizations. In addition to the companies’ approaches, the perception and expectations of customers could be investigated, to determine, if companies act and behave according to the customers’ desires. Data could be gathered by observing the customer engagement on public accessible social media platforms, as well as by conducting surveys among them.

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APPENDIX

INTERVIEW GUIDE

Introduction:  What is your role in your company and in which department are you working?  How many employees does your company have?  Introduce our research problem and define “Social Media” from our findings

General Questions:  Is social media used in your company for business purposes?  When did you start using social media in your company?  Why did you start using social media?

Social media use of companies in value chain activities

 In what activities are social media applied? o What types of social media are used for the different activities?  Why “only” for the mentioned activities? o Have you considered social media for the other activities as well? o Why not for the other activities?

Perceived benefits of using social media for companies

 What do you consider to be the main advantages of using social media for companies? o Where do you see the main advantages specifically for your tasks/usage?  How do you use [Type of social media] for the specific [Task]?  Why did you decide on [Type of social media] for this [Task]? o What do you hope to improve/achieve with this use of social media?

Challenges faced by companies using social media

 Where do you see main challenges/risks for your company of using social media?  What were the main challenges when social media was implemented?  How did you deal with these challenges?  What are the main challenges now?

Companies’ strategy to deal with the challenges

 How do you deal with these challenges? o If they don’t mention any challenges/risks, ask them what they are doing concerning the risks we have found? o Do the companies deal with these challenges/risks? . How? Special strategy? Precautions? Or wait until they occur? o How did you solve/manage that problem?

 Do you have a clear strategy regarding the social media utilization? o What is it? o How do you realize it?  Do you have special departments / personnel which are in duty of dealing with social media? o How big is the department o How many employees are considered with the social media activities

Future outlook:

 How do you see your company's future usage of Social Media?  Are you going to extend your efforts?

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