The effects of social media in modern business
Introduction
Thesis statement: Social media affects modern business positively and negatively. Social media alludes to web-based applications that facilitate interactions in which people exchange information in virtual networks and communities. It requires Internet and mobile technologies to develop interactive platforms that allow users to generate, modify, discuss, and share content. Reach, immediacy, frequency, and permanence are some of the features that distinguish social media from traditional media. Social media technologies have many forms, including Internet forums, social blogs, vlogs, weblogs, wikis, podcasts, social networks, microblogs, and videos/pictures/photographs. Popular social media platforms include YouTube (for video-sharing), Twitter (for microblogging), WordPress and Blogger (for blog hosting), Flickr and Photbucket (for photo-sharing). LinkedIn, MySpace, and Facebook (social networks), Digg (a social news site), eHow (an article directory), and Wikipedia (a collaborative project and wiki-based encyclopedia). Others are content communities, such as DailyMotion, virtual social worlds (Second Life), and virtual game-worlds (World of Warcraft) (Kaplan 129-130). The present paper will discuss the positive and adverse impacts of social media on modern business.

Positive effects Social media outlets have broadened the channels that companies can use to market their products/services. Businesses no longer need to rely on print and broadcast media, which can be expensive in terms of paying for advertising space and airtime. Through social media, businesses have an inexpensive and fast way of making their products/services known to their target markets. “Thanks to digital media, companies can get their information out to the public faster than ever. Instead of printing inserts and waiting for the Sunday paper to announce their sales, companies now can let the world know about an exciting promotion through email, social networking, their websites and Internet ads” (http://smallbusiness.chron.com). For instance, companies can exploit the marketing possibilities of Facebook by designing a page where they can advertise their products/services, offer deals, and develop their brand (Bosari 1). With Twitter, businesses can use “tweets” to tell current and potential customers about their products/services, release news, and direct buyers’ attention to attractive offers (Bosari 1). For example, Dell has over 80 branded Twitter accounts that offer the latest products and provide customer service. It runs a blog (Direct2Dell) that contains content about product deals, reviews, industry news and trends, and the company’s corporate social responsibility efforts (Barker, Barker, Bormann and Neher). The “Promote” option on Google+ allows firms to customize their promotional content by forming different follower groupings to which they can market differently. Additionally, the “Measure” element enables businesses to assess the frequency of use of their Google+ page (Bosari 1). Similarly, businesses can combine multiple media to appeal with many audiences whose preferences are different. As Morley points out, “Thanks to digital media, businesses now have many more options that they can choose from when seeking to get word out about their businesses. Instead of choosing among a TV or radio commercial or a print advertisement, they can now create media that is a combination of audio, visual, text and interactive media” (http://smallbusiness.chron.com). In this light, firms have multiple options to choose from during promotional activities. Companies can gain unsolicited media coverage and quick publicity from a large social media presence (Barker et. al.). The reason is that industry and press analysts turn to social media sites when developing their stories. Traditional publications, such as the Wall Street Journal or New York Times pick up stories from blogs using syndication tools like Blogrunner, BlogBurst, and Sphere. Likewise, many journalists research their stories with the aid of search engines (Barket et. al.). Thus, companies with a strong presence on social media outlets are likely to have their stories featured in print and broadcast media. Once their visibility increases, they can attract potential customers, employees, business partners, and financing entities. Social media helps in brand building, which is more about people’s perceptions of a company than what a firm says about itself (Barker et. al.). For instance, consumer reviews on a company’s discussion board help to define a brand and influence its perception. Employees can also influence a brand image through social media. For example, the “Howto” videos of Home Depot feature the firm’s employees demonstrating the best methods of conducting home improvements. Consequently, they have enhanced the company’s image as a trusted expert in its industry (Barker et. al.). Companies can enhance brand perception by creating online relationships with industry leaders, gathering positive posts, tweets, comments, reviews, and discussions that lend credence to their brands. When brand perception improves, the chances of increasing product/service sales are high (Barker et. al.). Social media platforms have a wide reach. They expand a company’s market share since they are capable of reaching customers who are difficult to attain through traditional channels, such as newspapers, magazines, radio, and television. With social media outlets, businesses can reach geographically-dispersed market segments at any location and time. As Morley notes, “A simple promotion featuring a giveaway or freebie can earn a business hundreds or thousands of Facebook fans and email/text message subscribers, meaning that the business can send a message to these customers with just a touch of a button”(http://smallbusiness.chron.com). They can disseminate information to a broad, as well as, specialized audience (Carroll). The ability of social media capture a large audience creates brand awareness that is unattainable with other forms of media (Barbara 1). Social media allows businesses to enhance their corporate reputation by engaging with individual customers, companies, as well as, other stakeholders, such as the community, media, and government (Carroll). “To build a corporate reputation through social media, companies and their stakeholders need to trust each other” (Carroll). Social media thrives on the fact that people enjoy conversing with one another. Thus, through tweets, blogs, online chats, and email, businesses can promote the transparency of their operations to stakeholders. They can respond to market needs/queries while correcting any misperceptions that stakeholders have about the company. Consequently, businesses can build stakeholder trust and loyalty, leading to a positive corporate image. Equally, the loyalty of current customers may convince them to promote a brand indirectly by informing family members and friends about a product/service (Barker et. al.). Ultimately, businesses can gain recommendations because they are at the front of consumers’ minds. Following customers up through social media channels can influence customer satisfaction positively. “Social media provides an opportunity for companies to build relationships and resolve issues that might otherwise taint a customer’s view of the brand” (Barker et. al.). When customers know that a company cares enough to listen to them, their satisfaction with its customer service is likely to increase. In turn, this boosts the company’s market share by attracting and retaining consumers in large numbers. Similarly, market share growth can raise a firm’s profitability and competitive edge. Social media can potentially boost staff productivity and retention, which, in turn, increase a company’s output, profitability, and public image. If employees can improve the pace at which they respond to work-related questions, they can impact their productivity and effectiveness. As Meister points out, “Most workers waste an average of 74 minutes per day trying to contact partners or customers and 67 minutes per day trying to find business information in roundabout ways” (www.forbes.com). Social networks minimize the time that employees spend obtaining occupational information and contacting customers/colleagues. According to Evolv’s study of hourly-paid US workers, such as call center representatives, employees who logged onto social networking sites weekly tended to retain their jobs for a long period compared to their peers. Those who employed over five social networks recorded higher sales within a shorter time than their peers. The study suggested that this outcome was attributable to an improvement in employees’ customer relation skills (Meister 1). Similarly, in his study of white-collar workers in leading technological companies in Germany, Finland, and the UK, Professor Nandhakumar form Warwick Business School established that workers who employed different social media platforms and digital communication modes were more collaborative, creative, and productive than their colleagues (Meister 1). For example, when design engineers need to offer solutions to clients’ needs, they apply the social media features of their enterprise systems to discuss strategies of configuring products to satisfy every customer. Consequently, they avoid the time-consuming activities required to meet those needs (Meister 1). Social media has eased the way businesses conduct market research. With mobile-based social media applications, businesses can obtain data about consumer offline movements in a detailed manner. For example, they can discover the time when customers visited the firm’s outlets or made comments in the course of the visit. “Today, though, applications like Foursquare make it easy to obtain general statistics, such as number of check-ins per time of day, gender, or age group; as well as individual ones, such as which customers have checked in most often or most recently” (Kaplan 131). With the aid of advanced data-mining techniques provided by social media, businesses can become efficient in the way they develop their customer databases. Since the advent of social media, businesses do not need to rely solely on printed coupons to provide sales discounts and other promotions to customers. For instance, Foursquare permits businesses to tailor their promotions to target certain users at a given time. Financial Times is an example of a business newspaper that gives a $300 premium subscription to Foursquare users known for checking in regularly at some coffee shops near Columbia University, New York and the London School of Economics (Kaplan 132). Likewise, when establishing the California-Cancun service, Virgin America gave price discounts to customers who visited selected taco trucks in certain locations at specified times. “In launching its California-Cancun service, users who checked in through Loopt at one of three designated Border Grill taco trucks in San Francisco and Los Angeles between 11 am and 3 pm on August 31, 2010, could get two tacos for $1 and two flights to Mexico for the price of one” (Kaplan 132). In addition to sales discounts and promotions, companies can boost their long-term growth by generating repeat business through customer loyalty programs available on social media. For example, Google Latitude gives customers an opportunity to earn gold, bronze, or silver status where they visit regularly. Such customers obtain discounts as a reward for their purchases from American Eagle Outfitters (Kaplan 132).
Negative effects Social media reduces companies’ control over their corporate image because stakeholders, such as customers and employees influence this reputation (Carroll). The two aspects of online communication that affect corporate reputation significantly are a firm’s products/services and its public image. “The nature of participation, lack of exclusivity, as well as, rapid and efficient dissemination of information on social media sites may pose a risk for a company’s reputation” (Carroll). Risks include a financial crisis, natural disaster handled poorly, customer service problems or product recalls. A company’s corporate image can be attacked online through lies, half-truths, manipulation of its photographs, privacy violations, hoaxes, and harassment (Wilson 1). Moreover, social media can predispose companies to bad publicity that generates brand negativity because customers will use such outlets to complain about issues that a company has failed to address or irresponsible actions that have violated their trust (Carroll). Since social media has a massive reach, negative comments can spread rapidly and damage a firm’s reputation in a short time. McDonalds is an example of a company that has experienced this effect. People tweeted negative stories on the company’s Twitter hashtag #McDStories, leading to a derailment of this campaign (Wilson 1). Likewise, Domino’ Pizza had its brand tarnished instantly by two employees who posted a prank video on YouTube showing a sandwich for delivery being prepared in an unsavory manner (Barker et. al.). Four factors facilitate negative behavior against companies. First, those who bully a brand feel no guilt/remorse. Second, there is a mob of people instigating and spreading false stories about companies. Third, the possibility of remaining anonymous strips social media users of fear of being discovered if they talk badly about a company. Fourth, social media users are not forced to be accountable for anything they post. Since punishments or sanctions are not imminent, users can easily malign companies and go scot-free (Wilson 1). Employees’ productivity, as well as, the quality of their work may reduce significantly if social media distracts from their job responsibilities. Since this media form is addictive, employees may be tempted to spend more time on it than focusing on their work. Similarly, if employees use social media for personal rather than professional/work-related purposes, they will miss out the value that it can add to their job productivity. “Productivity is an issue for organizations with concerns that overuse of social networking and media will reduce it or that it will act as an interruption to workflow and reduce concentration” (CCH Australia Limited 540). If this happens, they may submit poor work and are unable to meet deadlines. The overall organizational productivity and profitability are affected adversely when employees’ output decreases in quantity and quality. Companies have to bear the burden of shifting from traditional marketing forms to social media. In modern business, marketing entails engaging personally with customers, meaning that promotional campaigns that fail to increase consumer interaction are likely to be unsuccessful. As Lovering observes, “While social media-based marketing can be used effectively, businesses that are used to providing a one-sided sale must learn how to develop relationships with people buying their product” (http://smallbusiness.chron.com). For example, instead of giving statements concerning product lines and their benefits, firms have to create stories that emphasize their corporate culture. Equally, companies face the additional burden of monitoring negative or defamatory statements regarding their brands (Lovering 1). Businesses face high privacy and confidentiality risks with the advent of social media (Lovering 1). As Pelgrin highlights, “The more information a person posts, the more information becomes available for a potential compromise by those with malicious intentions” (http://msisac.cisecurity.org). The accessibility and volume of personal information on social networking sites attract malicious individuals who exploit it for their ends. For instance, they can infect such sites with malware, causing an organization’s networks to shut down. Alternatively, with keystroke loggers, hackers can steal individual/company credentials. Spear phishing, spoofing, social engineering, and web application attacks are used by criminals to steal people’s identities (Pelgrin 1). For businesses, they may lose critical staff and customer information, hampering their ability to satisfy the needs of these stakeholders, as well as, protect them from any harm that may ensue from the disclosure of personal data. Employees may blurt out inside knowledge about the company. They may do so inadvertently or intentionally out of malice. Such revelations are likely to destroy a firm’s competitive advantage because they expose its secrets to competitors. Since it is impossible to retrieve such information once it has spread on social media, the damage to the firm can be enormous. As Pelgrin notes, “Once information is posted online, it can potentially be viewed by anyone and may not be retracted afterwards” (http://msisac.cisecurity.org). The problem is complicated by the fact that it is difficult to monitor workers’ activities on social media and prevent them from revealing company information without authorization. Employees may post information or respond to queries and comments while posing as a company’s representatives (Lovering 1). The freedom that employees enjoy in terms of asserting themselves online hinders companies from limiting workers’ conversations to non-confidential matters. Apart from privacy/confidentiality concerns, a company could also be exposed to legal risks if a disclosure is made about firm operations that violate existing regulations. For example, if a business is engaged in activities that contribute to environmental degradation, such information will signify a violation of environmental laws, leading to litigation or possible closure of the company’s facilities.
Conclusion
The present paper has argued that social media affects modern business positively and negatively. The cost-effective nature of social media, in addition to, its potential of reaching a massive audience have drawn many businesses to social media marketing. Social media enhances businesses’ online presence while generating expansive media coverage and rapid publicity. Such visibility boosts companies’ customer base and prospects of finding talented staff, business partners, and sponsors. Social media also empowers companies’ efforts in building and creating awareness about their brands. In turn, this boosts brand perception, which triggers high product/service sales, firm profitability, and growth. Moreover, social media platforms reach audiences that might otherwise be unattainable with traditional media. The benefit of this is evident in expanding companies’ market share, as well as, customers’ brand awareness. Additionally, businesses can build their corporate reputation significantly because social media enables them to engage with multiple stakeholders and cultivate trust and loyalty. Through social media channels, businesses can conduct follow-ups to ensure that customers are satisfied with their products/services. Increased customer satisfaction is critical to boosting a firm’s market base, profitability, and competitiveness. Further, social media has the potential to ameliorate employees’ productivity and retention, leading to a positive image and high profitability for businesses. Companies can also access market research, sales discounts/ promotions, and loyalty programs from a variety of social media applications. In relation to adverse effects, social media can reduce employees’ output and the quality of their work if it is used for personal rather than professional motives. Additionally, companies have to change their promotional activities to support the customer-oriented approach of social media marketing. Businesses also experience privacy/confidentiality risks because of the possibility of sensitive company information being leaked through social media. Similarly, companies are susceptible to lawsuits if revelations are made about their lack of compliance with existing laws that regulate their business environment. In addition, social media can be a menace to a firm’s reputation if it is managed poorly. While companies invest immensely in building their reputation online, they can witness the destruction of their image in a short time. Social media has increased customers’ and employees’ power to influence a firm’s public image positively or negatively. For this reason, companies must invest in proactive communication and issues management to safeguard their valuable but fragile corporate image. Given that social media has a mass appeal and use, prohibiting employees from employing it during working hours may not work. Essentially, employees are difficult to manage inside the workplace and outside. Thus, the best options are to have a policy that outlines how employees should use social media inside and outside the office, in addition to, educating them on its positive and adverse effects on the business. Most significantly, companies can optimize the benefits of social media while reducing its adverse effects by identifying the platforms that best meet their business needs and developing suitable plans for using them. Works Cited

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