Read Closing Case Study Two (The Business of Social Media and Making the ROI) on

Question

Read Closing Case Study Two (The Business of Social Media and Making the ROI) on page 60 (Chapter 2)

and answer the following questions:

a. Let’s suppose your current annual sales are $1 million. You implement social media strategy

and begin generating $200,000 in revenue through your Facebook page. At the end your sales

are still $1 million. Was your social media strategy successful? Why o

r Why not?

b. Every social media strategy costs money to implement and there are a few of those costs

listed in the case study. Identify few other costs that you think are associated with social media.

Briefly describe them and classify them as fixed cost

s or variable costs.

c. Suppose you have a successful business with a well

-

liked product. One day something goes

wrong and you ship 100,000 defective products. Almost the entirety of your customer base is

disgruntled. What social media strategy would you

employ to help? Why?

d. Would you be better off by just “waiting for it to get over” or “by sticking your head in the

sand”? Why?

Explanation / Answer

Since the case study or its abstract hasn't been reproduced here, the answers that follow are going to be brief and short.

In economics, there is the concept of 'break-even'. Break-even is a theoretical point where revenues are just equal to total costs so much so that the producer neither earns profits or makes losses. Its an important concept in managerial economics considering that every corporate organisation initially goes for the break-even to have its hold established for the future.

So considering the strategy for social media that generates $200,000 and a maximum of $1 million, the manager still is considered to be at break-even since the business neither earned any net revenue nor made any losses. However, since a new strategy was applied, its costs too will also have to be considered and considering those might put the business into negative figures. So from the point of view of strategising, the approach can be considered as a failure since the very meaning of formulating strategies is to earn more profits.

Again since the case study is not reproduced here, we cannot but give only short answers. The concept of fixed and variable costs is universal. Since social media involves technical processes, its fixed costs can be equated to rent of office, long term loans if any, fixed salaries of workers, annual maintenance costs, etc. Variable costs can be the salaries for interns, temporary workers and unforeseen emergency costs.

In situations of mass defective produce, ethical businesses mostly reacquire the products as quickly as possible, refund their customers and improvise the product line. It takes time in a situation of a mass defect but can result in the customer base putting more trust in the company. In such dire times, managerial staff should immediately inform their customers that they will be refunding the full money and reacquire the goods in return for working products in a given time period. So its best not to stick the head in sand since its in the best interest to face the reality and fix it.

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