Baidu, Alibaba, and Tencent: The Three Kingdoms of the Chinese Internet SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Strategy & Execution
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Baidu, Alibaba, and Tencent: The Three Kingdoms of the Chinese Internet
This note provides an overview of the Chinese Internet by describing its leading three companies: Baidu, Alibaba, and Tencent (BAT). While BAT had previously focused their respective businesses on distinct sectors of the online economy-Baidu for search, Alibaba for e-commerce, and Tencent for games and instant messaging-the proliferation of mobile devices in China introduced new territory to be conquered. By the end of 2014, BAT had each made a series of investments and acquisitions to aggressively compete with each other and with other competitors in the emerging mobile space. This note can be used as background for any discussion related to the Chinese Internet industry.
Swot Analysis of "Baidu, Alibaba, and Tencent: The Three Kingdoms of the Chinese Internet" written by Feng Zhu, Aaron Smith includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Bat Baidu facing as an external strategic factors. Some of the topics covered in Baidu, Alibaba, and Tencent: The Three Kingdoms of the Chinese Internet case study are - Strategic Management Strategies, IT, Operations management and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Baidu, Alibaba, and Tencent: The Three Kingdoms of the Chinese Internet casestudy better are - – challanges to central banks by blockchain based private currencies, competitive advantages are harder to sustain because of technology dispersion, increasing inequality as vast percentage of new income is going to the top 1%, customer relationship management is fast transforming because of increasing concerns over data privacy, digital marketing is dominated by two big players Facebook and Google, geopolitical disruptions, increasing government debt because of Covid-19 spendings,
there is increasing trade war between United States & China, talent flight as more people leaving formal jobs, etc
Introduction to SWOT Analysis of Baidu, Alibaba, and Tencent: The Three Kingdoms of the Chinese Internet
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Baidu, Alibaba, and Tencent: The Three Kingdoms of the Chinese Internet case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Bat Baidu, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Bat Baidu 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 Baidu, Alibaba, and Tencent: The Three Kingdoms of the Chinese Internet can be done for the following purposes –
1. Strategic planning using facts provided in Baidu, Alibaba, and Tencent: The Three Kingdoms of the Chinese Internet case study
2. Improving business portfolio management of Bat Baidu
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 Bat Baidu
Strengths Baidu, Alibaba, and Tencent: The Three Kingdoms of the Chinese Internet | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Bat Baidu in Baidu, Alibaba, and Tencent: The Three Kingdoms of the Chinese Internet Harvard Business Review case study are -
Diverse revenue streams
– Bat Baidu is present in almost all the verticals within the industry. This has provided firm in Baidu, Alibaba, and Tencent: The Three Kingdoms of the Chinese Internet 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.
Operational resilience
– The operational resilience strategy in the Baidu, Alibaba, and Tencent: The Three Kingdoms of the Chinese Internet 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.
Sustainable margins compare to other players in Strategy & Execution industry
– Baidu, Alibaba, and Tencent: The Three Kingdoms of the Chinese Internet firm has clearly differentiated products in the market place. This has enabled Bat Baidu to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Bat Baidu to invest into research and development (R&D) and innovation.
High brand equity
– Bat Baidu has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Bat Baidu to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Effective Research and Development (R&D)
– Bat Baidu has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Baidu, Alibaba, and Tencent: The Three Kingdoms of the Chinese Internet - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Analytics focus
– Bat Baidu 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 Feng Zhu, Aaron Smith 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.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Bat Baidu digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Bat Baidu 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.
High switching costs
– The high switching costs that Bat Baidu has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Low bargaining power of suppliers
– Suppliers of Bat Baidu in the sector have low bargaining power. Baidu, Alibaba, and Tencent: The Three Kingdoms of the Chinese Internet has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Bat Baidu to manage not only supply disruptions but also source products at highly competitive prices.
Strong track record of project management
– Bat Baidu is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Innovation driven organization
– Bat Baidu is one of the most innovative firm in sector. Manager in Baidu, Alibaba, and Tencent: The Three Kingdoms of the Chinese Internet Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Superior customer experience
– The customer experience strategy of Bat Baidu in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Weaknesses Baidu, Alibaba, and Tencent: The Three Kingdoms of the Chinese Internet | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Baidu, Alibaba, and Tencent: The Three Kingdoms of the Chinese Internet are -
Low market penetration in new markets
– Outside its home market of Bat Baidu, firm in the HBR case study Baidu, Alibaba, and Tencent: The Three Kingdoms of the Chinese Internet needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Products dominated business model
– Even though Bat Baidu 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 - Baidu, Alibaba, and Tencent: The Three Kingdoms of the Chinese Internet should strive to include more intangible value offerings along with its core products and services.
Workers concerns about automation
– As automation is fast increasing in the segment, Bat Baidu 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.
Aligning sales with marketing
– It come across in the case study Baidu, Alibaba, and Tencent: The Three Kingdoms of the Chinese Internet 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 Baidu, Alibaba, and Tencent: The Three Kingdoms of the Chinese Internet can leverage the sales team experience to cultivate customer relationships as Bat Baidu is planning to shift buying processes online.
Increasing silos among functional specialists
– The organizational structure of Bat Baidu is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Bat Baidu needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Bat Baidu to focus more on services rather than just following the product oriented approach.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Bat Baidu supply chain. Even after few cautionary changes mentioned in the HBR case study - Baidu, Alibaba, and Tencent: The Three Kingdoms of the Chinese Internet, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Bat Baidu vulnerable to further global disruptions in South East Asia.
High cash cycle compare to competitors
Bat Baidu 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Baidu, Alibaba, and Tencent: The Three Kingdoms of the Chinese Internet, is just above the industry average. Bat Baidu 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.
High operating costs
– Compare to the competitors, firm in the HBR case study Baidu, Alibaba, and Tencent: The Three Kingdoms of the Chinese Internet 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 Bat Baidu 's lucrative customers.
Capital Spending Reduction
– Even during the low interest decade, Bat Baidu 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Baidu, Alibaba, and Tencent: The Three Kingdoms of the Chinese Internet, in the dynamic environment Bat Baidu has struggled to respond to the nimble upstart competition. Bat Baidu has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Opportunities Baidu, Alibaba, and Tencent: The Three Kingdoms of the Chinese Internet | 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 Baidu, Alibaba, and Tencent: The Three Kingdoms of the Chinese Internet are -
Building a culture of innovation
– managers at Bat Baidu can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Strategy & Execution segment.
Using analytics as competitive advantage
– Bat Baidu 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 Baidu, Alibaba, and Tencent: The Three Kingdoms of the Chinese Internet - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Bat Baidu to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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. Bat Baidu can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Manufacturing automation
– Bat Baidu 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.
Learning at scale
– Online learning technologies has now opened space for Bat Baidu 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Bat Baidu 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Bat Baidu 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, Baidu, Alibaba, and Tencent: The Three Kingdoms of the Chinese Internet, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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 Bat Baidu 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Bat Baidu 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.
Developing new processes and practices
– Bat Baidu 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.
Buying journey improvements
– Bat Baidu can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Baidu, Alibaba, and Tencent: The Three Kingdoms of the Chinese Internet 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Bat Baidu can use these opportunities to build new business models that can help the communities that Bat Baidu operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
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 Bat Baidu in the consumer business. Now Bat Baidu can target international markets with far fewer capital restrictions requirements than the existing system.
Threats Baidu, Alibaba, and Tencent: The Three Kingdoms of the Chinese Internet External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Baidu, Alibaba, and Tencent: The Three Kingdoms of the Chinese Internet 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 Bat Baidu business can come under increasing regulations regarding data privacy, data security, etc.
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. Bat Baidu 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.
Technology acceleration in Forth Industrial Revolution
– Bat Baidu has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Bat Baidu needs to keep up with the evolution of technology in the Strategy & Execution sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Environmental challenges
– Bat Baidu 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. Bat Baidu can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
Increasing wage structure of Bat Baidu
– 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 Bat Baidu.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Bat Baidu with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Shortening product life cycle
– it is one of the major threat that Bat Baidu is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Stagnating economy with rate increase
– Bat Baidu 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
– Bat Baidu 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Baidu, Alibaba, and Tencent: The Three Kingdoms of the Chinese Internet, Bat Baidu 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 .
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 Bat Baidu in the Strategy & Execution sector and impact the bottomline of the organization.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Bat Baidu 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 Baidu, Alibaba, and Tencent: The Three Kingdoms of the Chinese Internet .
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Bat Baidu 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.
Weighted SWOT Analysis of Baidu, Alibaba, and Tencent: The Three Kingdoms of the Chinese Internet 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 Baidu, Alibaba, and Tencent: The Three Kingdoms of the Chinese Internet 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 Baidu, Alibaba, and Tencent: The Three Kingdoms of the Chinese Internet 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 Baidu, Alibaba, and Tencent: The Three Kingdoms of the Chinese Internet 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 Baidu, Alibaba, and Tencent: The Three Kingdoms of the Chinese Internet 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 Bat Baidu needs to make to build a sustainable competitive advantage.