Tencent: The WeChat Red Envelope Initiative SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Strategy & Execution
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Tencent: The WeChat Red Envelope Initiative
Just before the celebration of the 2014 Chinese Lunar New Year, Tencent, the world's fourth largest Internet company, launched a mobile application for its popular WeChat platform: the Red Envelope. By clicking on a virtual red envelope icon, gifts of money could be sent to or received from friends and family to celebrate this special occasion. Combining a Chinese cultural tradition with modern social networks, this simple initiative soon became a major milestone in China's mobile market. It brought more than eight million users to Tencent's WeChat Payment platform in the first eight days after the New Year, helping the company break the barrier of mobile payment adoption among its vast user base and giving it a significant advantage in the country's competitive mobile payment market. This somewhat unexpected, record-making success, also made many companies rethink how to survive and thrive in China's rapidly growing technology sector.
Swot Analysis of "Tencent: The WeChat Red Envelope Initiative" written by Ning Su, Yulin Fang, Yukun Yang includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Wechat Envelope facing as an external strategic factors. Some of the topics covered in Tencent: The WeChat Red Envelope Initiative case study are - Strategic Management Strategies, and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Tencent: The WeChat Red Envelope Initiative casestudy better are - – challanges to central banks by blockchain based private currencies, digital marketing is dominated by two big players Facebook and Google, increasing commodity prices, increasing government debt because of Covid-19 spendings, increasing transportation and logistics costs, technology disruption, increasing energy prices,
geopolitical disruptions, cloud computing is disrupting traditional business models, etc
Introduction to SWOT Analysis of Tencent: The WeChat Red Envelope Initiative
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Tencent: The WeChat Red Envelope Initiative case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Wechat Envelope, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Wechat Envelope operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Tencent: The WeChat Red Envelope Initiative can be done for the following purposes –
1. Strategic planning using facts provided in Tencent: The WeChat Red Envelope Initiative case study
2. Improving business portfolio management of Wechat Envelope
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Wechat Envelope
Strengths Tencent: The WeChat Red Envelope Initiative | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Wechat Envelope in Tencent: The WeChat Red Envelope Initiative Harvard Business Review case study are -
Innovation driven organization
– Wechat Envelope is one of the most innovative firm in sector. Manager in Tencent: The WeChat Red Envelope Initiative Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Strong track record of project management
– Wechat Envelope is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
High brand equity
– Wechat Envelope has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Wechat Envelope to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Low bargaining power of suppliers
– Suppliers of Wechat Envelope in the sector have low bargaining power. Tencent: The WeChat Red Envelope Initiative has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Wechat Envelope to manage not only supply disruptions but also source products at highly competitive prices.
Superior customer experience
– The customer experience strategy of Wechat Envelope in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Diverse revenue streams
– Wechat Envelope is present in almost all the verticals within the industry. This has provided firm in Tencent: The WeChat Red Envelope Initiative case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Sustainable margins compare to other players in Strategy & Execution industry
– Tencent: The WeChat Red Envelope Initiative firm has clearly differentiated products in the market place. This has enabled Wechat Envelope to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Wechat Envelope to invest into research and development (R&D) and innovation.
Ability to recruit top talent
– Wechat Envelope is one of the leading recruiters in the industry. Managers in the Tencent: The WeChat Red Envelope Initiative are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Wechat Envelope digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Wechat Envelope has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Successful track record of launching new products
– Wechat Envelope has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Wechat Envelope has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Training and development
– Wechat Envelope has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Tencent: The WeChat Red Envelope Initiative Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Ability to lead change in Strategy & Execution field
– Wechat Envelope is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Wechat Envelope in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Weaknesses Tencent: The WeChat Red Envelope Initiative | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Tencent: The WeChat Red Envelope Initiative are -
Increasing silos among functional specialists
– The organizational structure of Wechat Envelope is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Wechat Envelope needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Wechat Envelope to focus more on services rather than just following the product oriented approach.
High operating costs
– Compare to the competitors, firm in the HBR case study Tencent: The WeChat Red Envelope Initiative has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Wechat Envelope 's lucrative customers.
Products dominated business model
– Even though Wechat Envelope has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Tencent: The WeChat Red Envelope Initiative should strive to include more intangible value offerings along with its core products and services.
Slow decision making process
– As mentioned earlier in the report, Wechat Envelope has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Wechat Envelope even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Need for greater diversity
– Wechat Envelope has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Workers concerns about automation
– As automation is fast increasing in the segment, Wechat Envelope needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Interest costs
– Compare to the competition, Wechat Envelope has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Low market penetration in new markets
– Outside its home market of Wechat Envelope, firm in the HBR case study Tencent: The WeChat Red Envelope Initiative needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow to strategic competitive environment developments
– As Tencent: The WeChat Red Envelope Initiative HBR case study mentions - Wechat Envelope takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Capital Spending Reduction
– Even during the low interest decade, Wechat Envelope has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
Aligning sales with marketing
– It come across in the case study Tencent: The WeChat Red Envelope Initiative that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Tencent: The WeChat Red Envelope Initiative can leverage the sales team experience to cultivate customer relationships as Wechat Envelope is planning to shift buying processes online.
Opportunities Tencent: The WeChat Red Envelope Initiative | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Tencent: The WeChat Red Envelope Initiative are -
Manufacturing automation
– Wechat Envelope can use the latest technology developments to improve its manufacturing and designing process in Strategy & Execution segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Low interest rates
– Even though inflation is raising its head in most developed economies, Wechat Envelope can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Learning at scale
– Online learning technologies has now opened space for Wechat Envelope to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Wechat Envelope to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Using analytics as competitive advantage
– Wechat Envelope has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Tencent: The WeChat Red Envelope Initiative - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Wechat Envelope to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Better consumer reach
– The expansion of the 5G network will help Wechat Envelope to increase its market reach. Wechat Envelope will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Developing new processes and practices
– Wechat Envelope can develop new processes and procedures in Strategy & Execution industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Wechat Envelope in the consumer business. Now Wechat Envelope can target international markets with far fewer capital restrictions requirements than the existing system.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Wechat Envelope can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Wechat Envelope can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Wechat Envelope to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Wechat Envelope to hire the very best people irrespective of their geographical location.
Buying journey improvements
– Wechat Envelope can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Tencent: The WeChat Red Envelope Initiative suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Wechat Envelope in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Strategy & Execution segment, and it will provide faster access to the consumers.
Threats Tencent: The WeChat Red Envelope Initiative External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Tencent: The WeChat Red Envelope Initiative are -
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Wechat Envelope business can come under increasing regulations regarding data privacy, data security, etc.
High dependence on third party suppliers
– Wechat Envelope high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Wechat Envelope needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
Increasing wage structure of Wechat Envelope
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Wechat Envelope.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Wechat Envelope will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Wechat Envelope in the Strategy & Execution sector and impact the bottomline of the organization.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Wechat Envelope with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Wechat Envelope can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Tencent: The WeChat Red Envelope Initiative .
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Tencent: The WeChat Red Envelope Initiative, Wechat Envelope may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Strategy & Execution .
Shortening product life cycle
– it is one of the major threat that Wechat Envelope is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Consumer confidence and its impact on Wechat Envelope demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Stagnating economy with rate increase
– Wechat Envelope can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Weighted SWOT Analysis of Tencent: The WeChat Red Envelope Initiative Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Tencent: The WeChat Red Envelope Initiative needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Tencent: The WeChat Red Envelope Initiative is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Tencent: The WeChat Red Envelope Initiative is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Tencent: The WeChat Red Envelope Initiative is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Wechat Envelope needs to make to build a sustainable competitive advantage.
