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 - – digital marketing is dominated by two big players Facebook and Google, increasing household debt because of falling income levels, technology disruption, customer relationship management is fast transforming because of increasing concerns over data privacy, geopolitical disruptions, increasing transportation and logistics costs, wage bills are increasing,
increasing inequality as vast percentage of new income is going to the top 1%, central banks are concerned over increasing inflation, 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 -
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.
Learning organization
- Wechat Envelope is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Wechat Envelope is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Tencent: The WeChat Red Envelope Initiative Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Analytics focus
– Wechat Envelope is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Ning Su, Yulin Fang, Yukun Yang can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
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.
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.
Operational resilience
– The operational resilience strategy in the Tencent: The WeChat Red Envelope Initiative Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
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.
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.
Cross disciplinary teams
– Horizontal connected teams at the Wechat Envelope are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Organizational Resilience of Wechat Envelope
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Wechat Envelope does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
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.
Highly skilled collaborators
– Wechat Envelope has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Tencent: The WeChat Red Envelope Initiative HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
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 -
No frontier risks strategy
– After analyzing the HBR case study Tencent: The WeChat Red Envelope Initiative, it seems that company is thinking about the frontier risks that can impact Strategy & Execution strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
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.
Lack of clear differentiation of Wechat Envelope products
– To increase the profitability and margins on the products, Wechat Envelope needs to provide more differentiated products than what it is currently offering in the marketplace.
High cash cycle compare to competitors
Wechat Envelope has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
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.
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.
Skills based hiring
– The stress on hiring functional specialists at Wechat Envelope has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
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.
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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Tencent: The WeChat Red Envelope Initiative, is just above the industry average. Wechat Envelope needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
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.
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 -
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.
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.
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.
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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Wechat Envelope can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Tencent: The WeChat Red Envelope Initiative, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Strategy & Execution industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Wechat Envelope can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Wechat Envelope can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Wechat Envelope can use these opportunities to build new business models that can help the communities that Wechat Envelope operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Wechat Envelope is facing challenges because of the dominance of functional experts in the organization. Tencent: The WeChat Red Envelope Initiative case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Strategy & Execution industry, but it has also influenced the consumer preferences. Wechat Envelope can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Loyalty marketing
– Wechat Envelope has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
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 -
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
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.
Easy access to finance
– Easy access to finance in Strategy & Execution field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Wechat Envelope can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 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.
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.
Regulatory challenges
– Wechat Envelope needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Strategy & Execution industry regulations.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Wechat Envelope in the Strategy & Execution industry. The Strategy & Execution industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
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.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Wechat Envelope.
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 .
Environmental challenges
– Wechat Envelope needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Wechat Envelope can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
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.