Tencent Holdings:
Company Background:
Following is the company background of Tencent (About Tencent, 2016).
1. Brief company description:
Tencent Holdings Limited is a Chinese company which is publicly owned and has subsidiaries. Its subsidiaries provide Internet and mobile phone value-added services and operate online advertising services in China. Many services of Tencent's holding include social networks, web portals, e-commerce, and multiplayer online games. Tencent holdings run one of the largest web portals in China, QQ.com and operate the well-known instant messenger Tencent QQ (In.reuters.com, 2016).
SWOT analysis of Tencent
Strength of Tencent
Strength based on platform: Tencent is one of the oldest Internet corporations in China founded in 1998. The company operates its platform based on the platform - QQ which is China's first instant messaging software. At one moment Tencent has passed 100 million users with over 1 billion registers (MBA Skool-Study.Learn.Share., 2016).
Strength based on innovation: Tencent holdings are listed as Forbes 55 innovative companies, and the online giant has proved itself as Asia's Fab 50 perennial seven times in a row.
Strength on its diverse: Tencent has diversified its product range from social networking to multiplayer online games. The brand of QQ has a great impact on people’s daily life especially the habitual users of the internet. Tencent diverse products are based on the QQ number like QQ Music, Q-Zone, and Tencent microblog. These products help to attract a customer base.
Strength on researching and development ability: Tencent has excellent R& D facility. Company and more than 50% of its employees focus on company's R&D. Tencent has established China's first Internet institute -Tencent Research Institute in 2007. The main task of Tencent is the research and development of core technology on Internet. Tencent has captured most of China's Internet market with mature technology and rich experience (Shen, 2010). It holds the strong position in instantaneous marketing domain; it has got a lot of patents under its name.
The strength of capital: Tencent is the leaders in internet services in China. According to the statistics of 2015, Tencent is the 3rd largest internet operator in the world and the largest in China. It is listed in 164th position on the basis of profit, 836th position on the basis of assets value and holds a 31st position on the basis of the market value. Tencent is the first listed company in China. In 2009, its share price increased by 239.38% (Shen, 2010).
Weakness of Tencent
Sole presence in China: Though it claims to function worldwide, it has dominated the Chinese internet market and has a sole presence in China which makes it vulnerable to risk, if any associated with the country. They are unable to reach globally and take the maximum advantage of the huge global audience.
Weakness result from its diverse products: As it has a wide variety of product, different cost associated with the product will be high. It needs larger data processing system for the diverse product. Some of Tencent's products and services have the similar functions. Therefore, there is competition among the different product of Tencent Company itself (Shen, 2010).
Lacking the ability of self- innovation: Nowadays, internet users are choosing other companies over Tencent as they have realized Tencent instead of focusing on innovative products, try to copy from other companies’ most popular products and services (Shen, 2010). From the market leader, they have become a follower of some most popular services. So without a strong base which was built on innovation ability, Tencent may have less advantage in the competition with other companies and gain less market share.
Opportunity of Tencent
Globalization: With the advancement in technology and the process of globalization, the overall Internet market is fostering. It has gained high popularity among people and has been serving as a basic necessity for most of the people. So with this Tencent also has the opportunity to increase its market globally. At the end of 2010, Tencent published QQ International, which aims at getting the international market share (Shen, 2010).
The rapid development of mobile phone Internet: Not only in China but worldwide people are using mobile phones with internet facilities. The volume base of mobile phone subscribers in China has been increasing since 2011, hitting a new landmark of more than 1.25 billion users in April 2014.The number of users choosing broadband mobile Internet services (3G and 4G services) reached 674 million by the end of June 2015, accounting for 52.1 percent of all mobile phone users (We Are Innovation, 2014). As a result, all the operators of the internet service must compete for the internet market even in the mobile. Tencent has been using its own software for mobile phone, like mobile QQ, QQ Input for mobile phone and so on.
Threats of Tencent
Strict governmental laws and policy: After the rapid development of internet technology, China has brought new laws and policies relating to the internet to reduce cyber crimes.
Threats from innovation: As Tencent is following the popular products instead of creating them; it can face a huge threat like Nokia. Though it was a market leader of one time, faced unexpected downfall after the market was taken by smart phones. Thus, the innovation of other company could be the major threat to Tencent if it can't be proactive.
Competition from its monopoly status. Increasing competition due to a global player. Many companies are entering Chinese market as well as another market globally, so Tencent is facing urgent crisis and competition (We Are Innovation, 2014).
THE "PESTLE" ANALYSIS OF TENCENT
Tencent's high performance is highly dependent on company's ability to address its external factors in its remote or macro-environment. The PESTLE analysis is the most significant external factors that Tencent must include in addressing its macro-environment. These factors may consist of opportunities as well as threats that affect the business. To maintain its leadership position in the internet market, Tencent should adopt various strategies to exploit opportunities and protect the business from threats.
P→ Political factors: This aspect of the PESTLE analysis shows the influence of organizations, such as government, on business.
Stable politics in a country: The stability of the political landscape in China, as well as most of the developed countries, presents opportunities for Tencent as it will create less difficulty in operating business.
A new law regarding internet services is formulated: China had little protection about the virtual goods in the online games, but recently it has issued the real-name authentication to protect the consumer's interest (Ma and Au, 2014).
E→ Economic (also environmental) factors: This aspect of the PESTLE analysis shows to market and industry conditions that impact firms.
Stable growth of developing countries: The economic stability of most developed countries creates opportunities for companies like Tencent to expand their businesses.
The rapid growth of developing countries: The rapid growth of developing countries plays a vital role. For instance, the high economic growth rates of Asian countries are major opportunities for Tencent to increase revenues through expansion in these foreign markets (Ma and Au, 2014). As the living standard has changed dramatically in China, people willing to spend money on the on-line game has increased.
No tax policy: as the legal system has not yet developed properly, there is any taxation policy for e-commerce and network shopping in China. Therefore, many individuals would like to do business online than in physical stores.
S→ Social factors: This aspect of the PESTEL/PESTLE analysis model indicates to the social influences on consumer behaviors and expectations.
The increasing use of mobile access: The main social factor presented in this section provides an opportunity for Tencent as more and more people are using mobile internet. Their lifestyle has been changed drastically; people nowadays prefer chatting over meeting face to face. The internet has become the lifestyle to communicate with each other. And understanding that need, Tencent gives those people a chance to do this on the internet; So QQ has gained popularity (You et al., 2015).
Rising use of social media: The rising use of social media is also an opportunity because it increases demand for internet services and helps Tencent to increase its market.
T→ Technological factors: This aspect of the PESTLE analysis model indicates current technologies and technological changes that affect business conditions. Tencent technological nature of business means that external technological factor has a major impact on the firm.
Growing Internet access in developing countries: Tencent has a high opportunity based on these external technological factors. The company can expect higher growth in the technological field in upcoming days.
The rapid adoption of mobile devices in the global market: There has been a significant change in the global market. More and more mobile friendly apps are being developed. As people are mobile-friendly too, they are getting access to more and more information technology. Since more and more people know about Tencent because of information technology, it is so popular to modern people (Chen, 2014).
L→ Legal factors: Though other factors are considered as opportunities for a firm; legal factors are considered as threats to the business. Tencent has to operate under the legal limit, but if it operates legally under law or regulation, that threat can be act as an opportunity for business.
More regulations on online privacy: Tencent can seek the opportunities based on these external legal factors. To cite an example, the business can develop its privacy measures to shield individual users (Chen, 2014).
More regulations on intellectual property right: Tencent can develop innovative measures to discourage people from violating intellectual property rights.
E→ Ecological/ Environmental factors: Even though Tencent generates most of its revenues online, the firm is subject to ecological or external environmental factors. This aspect of the PESTLE analysis model considers the influence of ecological/environmental trends on strategic business direction.
The global spread of environmentalism: Tencent has opportunities to address these ecological/environmental external factors. The main idea is to improve the firm’s ecological/environmental impact.
Growing interest in sustainable business: If Tencent follows the idea of environmentalism; it can anticipate superior customer response based on positive acuity of the firm’s ecological/environmental contributions (Chen, 2014).
Recommendation:
Based on company's SWOT and PESTLE analysis the company should focus on both internal and external factor to maintain its leadership position. Tencent's success at present is linked to the capability of the company to capitalize its strengths to conquer weaknesses and threats, and to exploit opportunities.
The company must focus on exploiting these opportunities to maintain the company’s competitive advantage.
Develop innovative products with Tencent intellectual property instead of copying other company's products to reduce its threats.
Focus on competitors and cooperate more with a foreign company and enhance the popularity in other countries.
References
About Tencent. (2016). [online] Available at: http://www.tencent.com/en-us/at/abouttencent.shtml [Accessed 2 Mar. 2016].
Chen, C. (2014). Empirical Study on the Marketing Strategy and Effect on the Platform of Social Media: Taking Tencent Microblog as Example. AMR, 1014, pp.438-442.
In.reuters.com, (2016). Company Profile for Tencent Holdings Ltd. [online] Available at: http://in.reuters.com/finance/stocks/companyProfile?symbol=0700.HK [Accessed 2 Mar. 2016].
Ma, C. and Au, N. (2014). Social Media and Learning Enhancement among Chinese Hospitality and Tourism Students: A Case Study on the Utilization of Tencent QQ. Journal of Teaching in Travel & Tourism, 14(3), pp.217-239.
MBA Skool-Study.Learn.Share., (2016). Tencent Holdings | SWOT Analysis | USP & Competitors | BrandGuide | MBA Skool-Study.Learn.Share.. [online] Available at: http://www.mbaskool.com/brandguide/it-technology/4709-tencent-holdings.html [Accessed 2 Mar. 2016].
Shen, S. (2010). SWOT: Tencent, China. [online] Gartner.com. Available at: https://www.gartner.com/doc/1424017/swot-tencent-china [Accessed 2 Mar. 2016].
We Are Innovation, (2014). Global Challengers, Innovation Styles and Complexity. [online] Available at: http://weareinnovation.org/2014/09/16/global-challengers-innovation-styles-and-complexity/ [Accessed 2 Mar. 2016].
You, Z., Han, X., Lü, L. and Yeung, C. (2015). Empirical Studies on the Network of Social Groups: The Case of Tencent QQ. PLOS ONE, 10(7), p.e0130538.
